I see it differently to you. As the thread may/may not know I did like GTN mid-last year since it was cheap on a cash flow basis, but as I realised most cash flows would go to debt-holders and little would come to shareholders (EV/FCF is closer to 20 when P/FCF is under 3 and interest coverage fluctuated only between 1 and 2 at historically low rates), I closed my position.
But this press release has piqued my interest again slightly - Gray and Marquee Broadcasting Swap Television Station (globenewswire.com)
So, GTN are swapping two revenue-generating stations for an unbuilt station. What are they seeing? Naturally, an unbuilt station will require precious cash outlays and I have no idea how expensive that is.
Also, worth noting that this isn't the first interesting move that GTN have done. When I was interested, Assembly Atlanta was happening (they were diversifying their business building a film studio (or studios) - I can't remember) which was obviously a much larger scale. It's worth reiterating that capex was higher than usual in 2023 because of Assembly Atlanta - I'm sure capex in 24 and 25 will be much better (all things equal).
Imo, just really focus on the cash flows closely as an equity-holder. For me, it was just too close for comfort. The fact they're having to refinance when ROIC rarely exceeds 10% is worrying - I fear economic profit is negative!
Also, worth mentioning that Moody's downgraded GTN to B2 from B1 in the last week (highly speculative). Fitch, otoh, rates GTN BB- (Non investment grade speculative) which is the level above highly speculative.
Good luck to both you and Sean! I wouldn't mind being proven wrong here. If I had to bet, a positive outcome for shareholders will be dependent of sheer quality of management. Research the team's historical success rates and that will probably give you your answer.
Best,
Harsh |
