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Newcastle Investment Corp. Message Board

  • hanakookie hanakookie Sep 4, 2013 9:15 PM Flag

    New media value

    With what little information Wes has given what do you think is the real value of new media. I don't follow media companies but any insight would help.

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    • hana...
      I subscribe to one of two general circulation newspapers for our metropolitan area because my wife likes two particular particular inserts that the newspaper publishes once every week and because she likes to read the obituaries. If it was up to me, I would have canceled the subscription long ago. However, we also get a weekly publication for out small township that contains the local news, local events, and local ads. This is a welcome publication because it tells me of things happening locally and is focused on neighbors and friends. I also retired from a business where we advertised in a local print publication that was specific to our industry. Both the local news publication and the local, industry specific, print publication do well because they are either local or specific in nature while the general circulation newspapers are struggling. From the press release, the presentation and the CC I thought is was quite clear that the markets that are being targeted are the "local" news market and the specialty advertising market and not the markets targeted by general circulation newspapers or Google. This transaction is interesting to say the least and I believe will be for the long term good of the current shareholders. I'll be sticking around to see what happens.
      Wishing you the best

      • 1 Reply to lunco
      • Funny. I get three local papers every week and they are FREE. I would probably cancel if they asked for a subscription. They support themselves with advertising and insert fees. I can get the local news from the "Patch" internetfeeds that have been in the "news" lately. Perhaps this is something NewMedia might be aiming at:
        AOL on Friday moved to cut losses at Patch, its struggling local news service, eliminating as many as 500 positions and closing or consolidating many of its sites across the country.

        The cuts were an effort to reach profitability in a division that has failed to gain traction with consumers and has suffered huge losses financially. Patch’s troubles have been a source of frustration for AOL’s chief executive, Tim Armstrong, who helped found the service in 2007 when he was an executive at Google. Shortly after arriving at AOL in 2009, Mr. Armstrong had the company acquire Patch.

        Patch’s idea is to provide an online network of local news sites, filling the gap in coverage left by newspapers that have either closed or greatly scaled back their investment in reporting in response to declines in advertising revenue.

        The company said it had analyzed the performance of the approximately 900 Patch sites and identified about 60 percent as high-performing ones that should remain intact. AOL said it would look for partners to operate 20 percent of the sites that are considered viable, and it would close or consolidate the rest. At its current staffing, Patch has more than 1,000 employees

    • Greetings-

      I am a newcomer to your message board. I felt compelled to comment about the value of this transaction. If you have been following any news lately regarding aqcuisitions, some very, very intelligent, sophisticated and successful individuals are purchasing print media...why? No, I don't know the answer, but the aforementioned are making these purchases for a reason. I'm glad i'm along for the ride (full disclosure-I only purchased NCT after reviewing insider purchases in July 2012-I have 5,750 shares).

      These print media thing is becoming very interesting.

      Sentiment: Hold

    • hana, I don't know anything about community newspapers, but I think Wes talked about a 30%+ cash-on-cash return yesterday for the "New Media" entity. The newspaper biz isn't the most prepossessing type of business, and I'm not attracted to that business. But, Wes says the community newspapers are stabilizing, they produce a lot of cash flow, and if Gatehouse sheds debt through Chapter 11, he thinks the business will be structured financially so it has a shot at becoming a sustainable business. And there's even the possibility of some growth if the digital services part of the business performs the way he expects it to.

      So, what to do? If the Chapter 11 and spinoff of "New Media" transpire as Wes discussed yesterday, I'd expect the new stock to trade at a low multiple of cashflow/dividend/book value, reflecting the dim outlook for print newspapers and the substantial risk in a business beset by competition from Google, Yelp, and other internet companies. Investors will take a "show me" attitude toward the "New Media" stock until and unless it can prove itself over time and establish a track record. So, I agree with Wes that the best option is to spin off the media assets into a new stock, so it doesn't dilute NCT's business of owning senior living properties.

      If I were a new investor in NCT, I'd say the chances that "New Media" will succeed and produce the high end of the range of results Wes previewed yesterday are slim. But, Wes Edens and Ken Riis have exceeded my expectations multiple times over the last three years. Little did I know when I bought my first shares of Newcastle in 2010 that it would turn out to be a stellar investment. It's amazing the way some of these "master of the universe" New York banker types are able to continue to pull more rabbits out of their hats. So, I'm going to suspend my skepticism and let Wes and Ken do what these Fortress banker types do--which is to make a lot of money for themselves and their shareholders.

      Sentiment: Strong Buy

      • 1 Reply to deanmortensen
      • dean: Also remember that management has always been very conservative on their projections of new business. Look at NRZ, which is now returning well above their intitial return numbers. It remains to be seen if it continues into the future, as it's only been about 1 quarter but I'd certainly be happy with returns on their original projections. I too will be holding the NMC (New Media Corp?) spin off to see what transpires. Heck, I've been holding NCT since 2005 and crying all the way to the bank. :~)

    • Rupert Murdock is selling with all his experience and we with no experience are buying? Wes Edens is a coyboy for sure!

    • I think if you look at the base case they provided in terms of the equity in the new company, they are putting in 230 million spread over 293 million shares. Unfortunately, the closest comp I could really see is NYT which is much larger of a company (however does not pay a dividend) and it's EBITDA multiple is about 5.5x (which must be the range that they gave in the presentation from 4.0-5.5x on the higher side in terms of comps). The GHS looks around a 2.2x EBITDA multiple purchase price (I might be misinterpreting the purchase price off Appendix A - I couldn't find it specified anywhere). The estimated EBITDA for 2014 for the two entities combined looks around 94 million and the total shares 496 million (293 / 59% stake). If you apply a 5.0x multiple to the 2014 EBITDA I get a $0.95 share price.

      Just trying to throw some rough numbers together - obviously I think the case for future growth plus a hefty dividend would weigh positively on the stock price as well, but its difficult to tell what the market would price this at given the declining state of newspapers over the last 10 years. I'll hold onto it for a few years just to see if they can pull off the transition from print to digital. I think the local markets those digital papers will serve in the future will be just as important as the printed ones - its just a lot of these smaller shops don't have the time, expertise or leverage to properly roll out a digital strategy. Maybe some consolidation like this could be a boon to these smaller papers as they can leverage the parent company's digital technology.

      Sentiment: Buy

 
NCT
13.41-0.01(-0.07%)Aug 28 4:00 PMEDT

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