SBS Buyout Has Implications for Central European Media Enterprises

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Yesterday’s SBS Broadcasting buyout deal at 15 times 2005 management guidance for EBITDA has ramifications for valuation on Central European Media Enterprises (CETV). CETV is a faster growing company than SBTV because it is fully dedicated to higher growth emerging ad markets in Central and Eastern Europe. Consequently, I would argue that CETV would sell for a higher multiple on 2005 estimates than SBTV. Alternatively, CETV could sell based on forward estimates…

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SBS Broadcasting Accepts Buyout Offer

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SBS Broadcasting confirmed recent market rumors and announced this morning that it was accepting an unsolicited 46 Euro ($56) buyout offer from a European private equity firm. Below please find my comments as I was conducting my analysis beginning with my thoughts prior to the open of trading and finishing up with my conclusions after listening to management discuss the deal on a conference call. The bottom line is that I think there is hope for a higher bid and near-term downside is minimal. Therefore, I plan to hold all client positions for now to see if another bidder emerges….

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More Takeover Rumors for SBS Broadcasting

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SBS Broadcasting (SBTV) shares jumped about 8% on Monday after a website reported that the company had held “informal discussions” with an unnamed suitor. The story said that a spokesman for SBS had no comment on rumors or speculation.
I think a takeover of SBTV is plausible and while the primary reason behind my bullish view of SBTV being has been based on fundamentals, I have noted that a sale of the company was possible. Rumors of a possible sale of SBTV first surfaced a month ago when a European analyst noted in a research report local media reports about takeover speculation. Here is what I posted on the blog at that time….

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Disney Earnings Fail To Provide Desired Catalyst For Shares

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Disney (DIS) shares fell 3% on Wednesday in reaction to the company’s 3Q05 earnings report. The quarter was decent but I found the 3Q results disappointing as I was expecting an unequivocally strong report to act as a catalyst for the shares. However, I did not find the results to a major miss and was a bit surprised with the harsh reaction by the market. Coming off the quarter, I am holding all client positions and still think the shares belong in the low $30s. However, comps toughen in the second half of calendar 2006, so the window is narrowing a bit for that objective to be achieved. My key takeaway from the quarter is that things better liven up in the next two quarters or owning the shares will have been a waste of time….

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Lions Gate Reports Mixed Quarterly Earnings

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Lions Gate Entertainment (LGF) shares traded down about 7% on heavy volume after the company reported 1Q06 earnings last Wednesday. EPS and EBITDA (operating cash flow) missed estimates by a wide margin but revenues were in line and free cash flow was better than expected. On the conference call, management reaffirmed guidance for FY06 assuming the company’s upcoming theatrical releases meet what they believe is conservative box office budgets. Specifically, the company has assumed that sequels to Saw and Diary of a Mad Black Woman earn 30% less at the box office than their predecessors.
I think the LGF story may play out over a longer period than I initially expected but the asset value remains and continues to build. Further, if guidance is hit, there will be a big acceleration in financial performance over the next three quarters which could serve as a catalyst. Consequently, despite the miss in 1Q06, I am holding the shares owned by Northlake clients and would look to buy more if the shares weaken further….

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Another Solid Quarter for Central European Media Enterprises

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Central European Media Enterprises (CETV) shares responded positively to its earnings announcement last Thursday as the company reported a solid quarter and maintained a confident and bullish stance on its conference call. As is often the case with CETV’s quarters, there was some variance on a country by country basis, but the overall thesis is firmly intact. I am looking to the seasonally strong 4Q to see broad-based strength across most of the countries the company operates in with a return to very strong growth in Ukraine likely to be a highlight.
In the latest quarter, Romania was the star with revenues up 42% and EBITDA up 102%. This masked slower growth in Slovenia, Slovakia, and Ukraine in the quarter although the results in those countries matched company guidance. CETV has different seasonality this year in terms of comparisons due to an unusually strong 1H04. This suggests growth rates will pick up in 2H05, especially in Ukraine…

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August Model Signals

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I was out of town and unable to post on the August Model Signals last week. As clients have seen by now, the new signals led to a trade in the ETF portion of their portfolios. Specifically, the Market Capitalization model shifted from a mid cap signal to a small cap signal. Consequently, all holdings in the S&P 400 Mid Cap (MDY) were sold and swapped into the Russell 2000 Small Cap (IWM). The Mid Cap holdings were sold for almost a 5% profit. There were several shifts in underlying factors that led to the new signal

SBS Broadcasting Reports Another Good Quarter

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I had to jump in a car to head East on some college visits with my son and didn’t get a chance to provide some color on the SBS Broadcasting (SBTV) conference call that took place on July 28th. As the call started at 10 a.m. ET, the shares were down sharply by almost $3. I thought the quarter was fine but SBTV is a complicated company operating several different media business in about a dozen Northern and Eastern European countries, so I could have missed something.
I was pretty certain, however, that whoever was selling was making a mistake and shortly into the call I put in bids for the shares slightly below the market. Northlake clients have full positions in SBTV so I didn’t bid aggressively, which I now regret as my initial impressions were correct: By the end of trading on Friday, SBTV shares were down only $1, where they remain today despite recent weakness in the broad market…

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