Spinoff Odds and Ends: Value In $MSG and Nacco($NC)

Lets follow up on some recent articles –

  1. A few weeks ago we highlighted a writeup from Yet Another Value Blog advocating for Liberty Braves (BATRK). Part (well, a small part) of the author’s thesis was the unique nature of sports team assets and how their valuations are often underreported. Somewhat buried amidst the tragedy of Hurricane Harvey came the blockbuster news that the Houston Rockets, previously ‘valued’ by Forbes at $1.6b, would be sold to a local billionaire for $2.2b. The price breached the ‘crazy’ $2b price paid by Steve Ballmer for the Clippers in 2014 and once again demonstrated the value of these assets. Houston is a big city, but it’s not one of the largest markets in the country. Yes, they have a good team, but those things are fickle. ESPN thinks the sale doesn’t represent a new trend in franchise pricing…but lets be honest, we don’t read ESPN for investment advice. The logic there doesn’t make sense to me. As usual, MSG (MSG) popped on the news as investors inferred that if the Rockets are worth $2.2b then the Knicks’ valuation should be rerated higher. Eventually some ceiling will be hit in this market – perhaps due to future TV deals collapsing or if the economy takes a turn for the worse – but these are truly unique trophy assets.
  2. Clark Street Value thinks the upcoming Hamilton Beach spinoff from Nacco Industries (NC) looks interesting. We wrote about this spinoff a few weeks ago and noted the odd combo of a coal company being paired with a small appliance brand. He argues the company is undervalued and offers quite a bit of upside:

Add the two pieces up, $262MM for the parent and $565MM for the spinoff, minus $54MM of net debt (which is at the parent) and you get an estimated equity value of ~$775MM versus a current market cap of $475MM.  Another way to put it, the market is likely putting little to no value on the coal business despite its asset light nature and consistent cash flows.

As per usual, the piece is worth reading in its entirety. Although I might quibble with some of the expected multiples he uses (for both businesses), this is one situation I plan on looking at more closely.

Disclosure: Author owns shares of Liberty Braves