MSGE. I've casually been following the split up of Madison Square Garden into two companies.
Whenever I've looked at the entertainment portion, I'm reminded of what I read last year: they were building a big theatre in Las Vegas. Something speculative by the company and not something I'm interested in the COVID environment.
Jan 21,2019. Barron's:
Some of the weakness in MSG stock reflects uncertainty surrounding the company’s plans to build a state-of-the-art concert arena called MSG Sphere in Las Vegas, expected to be completed in 2021, and a similar arena in London, due to open in 2022. The new Vegas arena will seat 18,000, have an LED exterior, and the “largest and highest resolution LED screen on Earth” inside, as well an acoustics system designed to deliver “crystal-clear audio” to every seat in the house, according to the company. MSG, however, hasn’t disclosed any financials on the Sphere projects, including projected costs and return objectives. Joyce is assuming a cost of $650 million each, and other estimates are higher.
Recently I came across this in a Barron's article about a guy who has a research boutique:
So, there’s Madison Square Garden Sports [MSGS], which owns the Knicks, and Madison Square Garden Entertainment [MSGE], which is what you like. Yes. MSGE owns the Garden, Radio City Music Hall, etc. There’s a case for liking them both, which is not the answer you want. So I’m going to err on the side of MSGE. It’s trading at a huge, 55% discount from our net asset value. I think it’s underfollowed. The split was [finalized] in the malaise of the Covid stuff. It has gone from big-cap to small-cap, and now it’s a great opportunity for future growth. Look at where Cablevision spun off MSG [announced] back in 2009. It started out at about sub-$20 and eventually hit $300. MSGE is building what they call a sphere in Las Vegas. They’re building the mecca of e-sports in Las Vegas. A year ago, a 16-year-old won $3 million on Fortnite, its world cup. ESPN is showing [e-sports] at night. E-sports are accelerating at a tremendous rate. You and I say, “Hey, it’s just kids gaming.” But you know what? The sports stars of the future are the guys sitting on the couch. Besides the future of e-sports, what’s to like about MSGE? You have land worth $1.2 billion. You’ve got the air rights worth $400 million to $600 million. You’ve got the Tao Group [a hospitality company that operates restaurants and nightclubs around the world]. And if you throw in the Sphere, as well—there’s huge upside. No one’s covering it; it’s only about a $1.7 billion market cap. The stock has plus-50% upside.
That info was interesting to me and somewhat reassuring, but still not enough to pull me in. Again, restaurants and nightclubs in this environment? I don't trust their net asset value.
About a month later, 9/18/20 respected money manager John Rogers was interviewed in Barron's:
Value investor John Rogers, chairman, co-CEO, and chief investment officer of Ariel Investments, says that one of his favorite holdings is Madison Square Garden Entertainment (ticker: MSGE), which owns New York City’s Madison Square Garden and other businesses affected by the pandemic. “They have a huge amount of cash, and it’s selling at a 50% discount to its private-market value,” Rogers says. “Once people are back going to concerts and games, it’s going to benefit tremendously.”
"...Huge amount of cash" got me to look closer. I see I missed it earlier: Has $51.71 in cash/cash equivalents. Total debt is about $11/sh. Tangible bv about $106/sh. Stock now is at $66.48. All that would seem to give MSGE lots of room to maneuver within and outside of its interest in their "sphere". (I've still no confidence in that venture. Otoh, of course it's being developed by the Dolan family - a controversial group, but proven good business people.).
l'll believe the cash pile provides a margin of safety (unless it gets dissipated). I am in for a few tracking shares of MSGE now.
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