SATH emphasized again today by Friedman Billings Ramsey for the play which is now about 10 days away.
"Look at the Stations, Not the Earnings"
On May 20, 2003, the company reported 1Q03 earnings by filing a 10Q. Earnings per share Earnings. were ($0.03) due primarily to a loss from the equity of the Shop At Home Network, 70% of which was
sold to E.W. Scripps in 2002. We believe that the value of SATH rests in the five stations that it owns. We value the stations at $256 million, which implies a $5.07 value for the stock. Reported earnings play no role in
valuation, in our view.
If the FCC votes to ease media ownership rules (vote is expected on June 2), the result FCC vote. would be bullish for SATH. In such a scenario, we could see a "pure play" such as SATH be attractive to
various buyers. This would imply prices higher than our base value of $5.07. In effect, the stock is an
option on the June 2 vote. Accordingly, we maintain our Outperform rating.
We believe that SATH's principal goal continues to be the unlocking of value from its TV station assets. In its
October 30, 2002 press release, SATH said that its efforts would be "directed to liquefying the undervalued
asset value for shareholders." This is further evidenced by the hiring of media broker Cobb Corp., which is
advising the company on the maintenance and operation of the TV stations, as well as managing the process of
finding and contacting potential strategic partners and exploring opportunities to sell the five TV stations.
Our current valuation of SATH is $5.07 per share. We value SATH based on a sum-of-the-parts valuation
methodology, with the company's five TV stations its primary assets: 1) station assets, $256 million; 2) network
assets, $21 million; 3) spectrum assets, $0; 4) debt, $47.5 million; 5) preferred stock, $3.2 million; and 6) cash
from options and warrant exercises, $20.2 million. These estimates translate into shareholder equity value of
$246.5 million, or $5.07 per share (42.4 million shares outstanding, plus 6.25 million shares from warrants and
options).
We believe that recent station sales support our station valuation (based on an appraisal from February 2002).... |
