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Entercom Communications Corp. Message Board

  • longtimefollower longtimefollower Nov 13, 2008 3:56 PM Flag

    The Street can talk all it wants...


    ...about how radio broadcasters deserve dramatically lower multiples on cash flow, because its no longer a growth industry, and because of the risk of covenant violations as we go into 2009 (on lower advertising revenues), and all this other nonsense. The reality is that the VAST BULK of players in this space, with the exception of the most highly leveraged ones, like, say, Radio One, CAN AFFORD TO CARRY THE DEBT THEY DO, and that their cash flow will continue to EXCEED their debt service payments....even in what will certainly be the "trough" for the industry (basically the next 6-9 months). When we are past the trough, the Street is suddenly going to "get religion," and dramatically increase its valuation of this industry, as it sees that many players here, including ETM, can use excess cash flow to basically buy in A MAJORITY of their outstanding share base in an amazingly short period of time, or can buy back debt, at a tremendous discount, or can take the company private (when the credit spigot loosens up)...or can sell out the company to another entity. There are a WHOLE HOST of ways for value to be created in this industry, but ultimately, CONTINUED SOLID CASH FLOW (even is materially down in 2009) is going to carry the day here. Radio broadcasters are NOT newspaper stocks....and they are NOT buggy-whip manufacturers. The Street has DRASTICALLY mispriced this segment, quite possibly more so than I have EVER seen in the stock market. If they cover their debt service, and/or get wavers, then the "option value" of many of these stocks is just EXTRAORDINARY. (My favorites are ETM and RGCI right now.)

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