Below is my write-up on A.H. Belo, which was spun-off from Belo Corp recently.
I would appreciate your feedbacks, especially on why my thesis might be flawed.
Disclosure: I'm long on AHC.
Cautions:
A.H. Belo (AHC): A Value Stock or A Value Trap?
I would appreciate your feedbacks, especially on why my thesis might be flawed.
Disclosure: I'm long on AHC.
Cautions:
- This is not a recommendation to buy or sell AHC.
- Please do your own work prior to investing in AHC.
- The author will not be liable for any potential losses resulting from your AHC investment.
A.H. Belo (AHC): A Value Stock or A Value Trap?
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5 comments:
I posted this on the gurufocus.com post but here is a repeat of my thoughts...
Very good analysis. Good job capturing the various elements at play. I've been looking at newspapers lately as well, and, well, let's hope neither of us fall into a value trap. Couple of notes...
I think it's worth including for the sake of completeness but I don't think one should put much faith in the Tribune takeover value. It was taken out when credit was cheaper (you can't do that deal right now--let alone for a newspaper.) But more importantly, Sam Zell's deal is structured to take advantage of tax benefits.
You probably already know this but I wouldn't put much weight to comparisons against The New York Times or Washington Post. The first because it has a lot of brand equity and is one of the few that may be able to leverage that to the online world on a large scale. The latter because it generates almost half(?) its revenue from the education industry. I think it's worth leaving them as a comparison but one should downplay the comparison.
One area I see some weakness has to do with potentially declining revenue. Given taht the whole industry is struggling, what happens if sales decline a bit? How will it perform with sales down, say, 20% over a 5 to 10 year period?
Where did you get the appraised value for the properties? I would be careful using cost basis for the Riverside property -- it may be too high.
But I agree there is a floor here based on the real estate. Seems like you have a free call option on the biz actually being worth something. 50 mil in cost cuts could make EBITDA a large number in 2009 if revenue found a way to stabilize -- not saying it will, but you aren't paying anything for the option.
Thanks Brian for your comment.
I go to various tax districts where company filed its appraised market value of properties for tax purposes.
For Dallas tax district, go to: http://www.dallascad.org/SearchOwner.aspx
Thanks. Great research. Finally, where did you get the list of properties, especially in the Dallas area? Or did you just assume ones that were assigned to the DMN and AH Belo were owned by AHC?
Yes, I assume that all the properties assigned to AHC are owned by AHC.
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