small town newspapers are not fairly compared to bigger markets. It is a very safe concept, imo. Hometown sports and obituaries, where you gonna go for this information other than your paper, whether its on paper or your tablet? If you grew up in a small town like me, its easier to understand this concept. Larger towns and cities don't have this phenomenon which makes their readers far less loyal...also, imo....I think WB also agrees...
What is the intereat rat eof the debt they are payingoff?
The latest numbers look great, the mobile is growing fast, it looks like the smaller old local media co's can adjust faster than the global titans aka NYT, Boston Globe which are losing a lot of money and laying off.
Absent another world blow up crisis LEE looks like a safe long term hold to make a solid return.
Nice to see the small profit in the 4th quarter and that revenues were essentially flat. Will they start to turn positive in FY15? With debt financing no longer an issue, management can focus on revenue generation and cost control. LEE will likely earn $0.50/share+ on flat revenues in FY15 with substantial debt paid down ($60M+). Starting off with $15M of debt paid off in the first two months is a good start to the year.
I think LEE will continue to focus on debt repayment, but your repayment schedule is too aggressive as you do not have CAPEX factored in. I think they can pay between $60-80M/yr increasing each year as debt falls off. Management has said they would be comfortable with a debt level around 300M at which point I think they will use their free cash flow for other things (i.e. dividends, stock repurchases). However, that is still 5+ years out and a lot can happen in that time. As long as the cash flow remains strong, the share price will only continue to go up as they pay down debt. Very patient investors can make a significant return on shares purchased at this level.
Here is one way to look at the current valuation - of course everything depends on how the actual business will do going forward. My estimate assumes that the revenue decline will stabilize and potentially even show minor increases YOY in another year or so. They are doing good things with cost control, on line subscription fees, mobile, etc. Current free cash flow is 100M per year. Interest is around 80M per year based on 800M debt. Debt could potentially be paid off as follow, with year 1 being 2015 -
Debt Beg. Balance Cash Flow Additional from reduced interest on lower debt balance New debt balance
800M 100M 0 700M
700M 100M 10M 590M
590M 100M 21M 469M
469M 100M 32M 337M
337M 100M 46M 191M
191M 100M 61M 30M
So potentially in 5-6 years the debt could be paid off - it doesn't have to be completely paid. At that point we would have 180M free cash flow assuming no improvements - at a conservative 8X multiple that would be a valuation of 1440M or 7 times current market cap and a price of about $30 per share. That would be a return of 40% per year compounded for 6 years. 50,000 today would be potentially 350,000 in 6 years. So what would todays valuation be to give a more normal 10% return - $17.00 - discount by half for uncertainty and it's $8.50
Sentiment: Strong Buy
Fundamentals are improving. Could see 10 by 12/ 2015. Up today on BIG volume.
Sentiment: Strong Buy
Looks like the Q4 results will be quite good! Their decision to expense the refinancing cost in Q3 versus amortizing it was a smart move.
Uh-huh. Friday's close of LEE at $3.29 times 88,863 shares equals $292,359. And 27 cents. Big money to me and probably you, too. But walking-around money for W.B. and Berkshire.
Really getting sick of the back and forth with LEE. I just joined ultimatestockalerts (google em) a month ago and have already locked in close to 20% gains with their calls.
Want picks that actually make money unlike LEE ENTERPRISES? Search Ultimate Stock Alerts on google right now. The pick they sent me 2 weeks ago is already up 27% from their call