Saxo Bank (Saxo Bank)
World markets  |  August 08, 2012 14:51:02

IPO Manchester United looking Analyst: Poor Investment

Manchester United (NYSE: MANU), although a great club, but a bad investment. It does not change anything on it or change the company going. Rather - I'm now even more confident that investing in these shares is not a good decision.

IPO Details

Proceeds from the IPO Manchester United plans to use to reduce its debt, which is in the balance sheet of the company got after the 2005 Glazer came to the leveraged buyout. If it sold 16.7 million shares (10 percent of their total number) for the price of one in the range 16 to 20 U.S. dollars, awards the club could get to 2.6 to 3,300,000,000 U.S. dollars. And it is twice more than what Glazer paid years ago for the whole club.

Since it was announced that the IPO will be used for debt relief, you would say that the revenues from it will be used for loan repayments.But it is terribly wrong! Everything is set as follows: club sold 8,333,333 shares at 16 to 20 dollars, which will eventually be used to redeem debt. And the rest, ie, income from the remaining 8,333,333 shares will be sold in your pocket Glazerovým. So just looking for the owners of the debt investors, who will help them reduce debt. Fill their own pockets.

After Glazer get their shares for a total of L 210 million will be approximately L 100 million used to reduce existing debt of 440 million pounds.Reduction of the total loan amount for the club will mean lower annual interest, and should remain so more money (perhaps) to be a player or stadium.

According to the details of the IPO listed in Table 1 are based, that the shares will likely trade in a range from 75 to 93 ratio of P / E (with respect to the estimated company profits this year). And it is awfully expensive for a company that in recent years, not too attractive profits or sales. And it's expensive to stock company whose business model is built on the football club. Such high valuation simply makes no sense.

Warning Signs

With details that are provided by the company last Monday, we now have a clearer idea of ??how the club will flourish in 2012. And as expected, I was very impressed.

But I agree with the fact that the club did one thing right. This is an area of advertising revenue, which covers sponsorship, retail, promotional items and licensed products (constituting about 35 percent of this year's sales). This segment is likely to continue to grow, just as the club announced a record sponsorship deal with automaker GM, which was recently the market leader.

Even so, however, are sales (advertising, broadcasting and games) heavily dependent on how the team managed just on the pitch, especially in income from broadcasting rights and individual games (which decreased in comparison with last year by 12 percent). Not only these two areas are sensitive to the performance of football players. Also, advertising revenue may fall along with worsening results of the team.

Despite the fact that in recent years, increased advertising revenue, total revenue this year will probably be about 3.5 to 5 percent lower than last year. Revenues from the company is deeply decreased after the club failed to qualify last year in the last phase of the Champions League. That shows how sensitive are the sales team's performance. With the decline in sales also increased costs for players and staff about 4 to 5 percent. This is the first warning signal! Revenues are falling, while costs are rising.

Another warning sign is the height of the tax credit, the club used in 2012. Because the tax credit was approximately L 27 million, the company manages to get into profit. The tax rebate is a one-off but the next year and already the club to gain not help. If this club did not get any discount, there would be no profits!

The third warning sign is that the operating costs are rising faster than revenues. The decisive factor in the operation of the football club are the players' salaries. As the world grows in a football competition, dramatically rising wages and players.If the club fails to accelerate revenue growth compared to wages and other costs, it will be a big problem. It is essential in the financial world.

Too expensive toy

Stocks with low or no growth, the P / E ratio is higher than 70? No, thank you! The issue is not a business that would be its scope to expand into new regions, to increase the number of matches played by the league played more outside their home country, or sister team based elsewhere. Broadcast rights and revenues from the games are simply bound to a certain level. The main factor that could bring an increase profits, the commercial value of the brand. And it simply is not enough for me to do from that investment.

Sverrir Sverrisson, equity analyst at Saxo Bank

 Globální online investiční banka

Saxo Bank je globální investiční banka specializující se na online obchodování a investice na mezinárodních finančních trzích. Saxo Bank umožňuje soukromým investorům a institucionálním klientům obchodovat s FX, CFD, cennými papíry, futures, opcemi a dalšími deriváty a poskytuje i profesionální správu portfolia a fondů díky svým online obchodním platformám oceněným řadou různých ocenění.

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IPO Manchesteru United pohledem analytika: Špatná investice

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