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Emmis Communications Corp. Message Board

  • longtimefollower longtimefollower May 12, 2012 2:18 AM Flag

    $30.8 M in pro forma consolidated EBITDA sand WRKS.

    http://www.emmis.com/Other/pdf/2012-Q4/Non-GAAP-leverage-disclosure_2-29-2012.pdf

    Subtract out the $7 million annual LMA for KXOS, and you get $23.8 M in remaining EBITDA, for the trailing 12 months, once KXOS and WRKS are gone. That is on an adjusted debt amount of $68 million, ($238 million less $85 M for WRKS, less $85 M for KXOS).

    IF you value "the remaining" Emmis at 8x EBITDA, that is about $190 million. Back out the $68 million in debt, and that leaves you with $122 million. The only thing you still have to account for, then, is the remaining preferred stock. If you account for that at $25 million, just to be conservative (I hope), that leaves $97 million in value, theoretically, for the common shareholders. On 38.7 million shares out, that's maybe around $2.50 a share in value.

    Major variables: 1) What kind of EBITDA multiple do you want to put on Emmis? (Anywhere from 7.7x-8.5x could be reasonable, by my guess.) 2) How do you want to value the remaining preferred stock, and how will that situation otherwise settle out?

    Obviously, I wouldn't expect the common to make a "bee line" for $2.50, but it seems clear to me that we are worth more than the current $1.35, and that, over time, we can trade higher, with $2.00 being, perhaps, a reasonable one year target. Depending also, of course, on where Emmis's earnings go from here. (Do they grow, are they flat, or do they shrink?)

    In any case, considering how low the adjusted debt is, relative to the underlying EBITDA, it would seem the Street is undervaluing Emmis's adjusted and recurring cash flows, in pricing the stock only at $1.35. But we may have to wait until the WRKS and KXOS transactions are completed, for the Street to make more of the appropriate "adjustment" to valuation.

    Really, to me, the most important arguments for a higher valuation are: 1) Once all the transactions, as announced, are completed, there will be no need for the (formerly) high debt to mask the underlying value of the assets, and cash flows, any more. 2) Emmis will have "magically" become one of the lowest leveraged radio companies, overnight, and 3) the company will now be in a refreshing position to experience GROWTH, and we will have, summarily and decisively, driven a stake through the heart of the Street's perceptions that the company was "gasping for air."

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