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Outerwall Inc. Message Board

  • valuation_matters valuation_matters Aug 14, 2012 2:07 PM Flag

    Creating Redbox for almost nothing

    For all the talk of the impending death of the DVD and Redbox what seems to be lost is that you aren't really paying anything for the business - especially if the coin business were sold. At this point, there is essentially no net debt. Retiring the convert with cash would leave a share count at about 31mm shares outstanding. I believe coin could be LBOed at around 8x EBITDA or about $900mm or about $29 per share. At today's prices, you are creating Redbox and all the venture businesses for about $18.7 per share or an EV of about $578mm. At $400 of EBITDA for Redbox or about 1.5x. So maybe Redbox goes away but it better be soon for the bears to be right at these levels.

    Long CSTR

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    • I often calculate a bottom price for a stock, the price where it can't go any lower, and I think Coinstar is close to the bottom. A fourth of America doesn't have internet at home, and a $1.20 DVD has a lot of appeal to them. I have internet, and I still prefer Redbox.

      I think your math is basically right. On top of this, the Redbox Instant venture will quickly create value, Starbucks kiosks have lots of potential, the company can raise prices to $1.40 with very little kickback, and as it continues to buy back shares, the stock price has nowhere to go but up. I am thinking about buying some more since it might be close to a bottom and still has lots of cash generating potential.

 
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