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Lee Enterprises, Incorporated Message Board

pipbustergreen 7 posts  |  Last Activity: 23 hours ago Member since: Nov 28, 2005
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  • pipbustergreen pipbustergreen 23 hours ago Flag

    Tgagrippa,

    I agree that LEE will eventually be a takeout target as the newspaper industry continues to consolidate. Not only is LEE undervalued from an earnings and cash flow valuation standpoint, but it is also undervalued for its takeout potential.

    I was surprised with GCI’s announcement of the hostile purchase of TPUB as they just completed the purchase of JMG. They purchased JMG for $280M which will add about $450M in revenue. That deal valued JMG at 9.2x EBITDA based upon 2015 EBITDA of $30.4M. The offer for TPUB is for only 5.6x EBITDA. GCI is making a low-ball offer and if they are serious about making a deal, they will raise the offer. I would not be surprised if they eventually offer close to $18/share which would be nearly a 7x multiple for TPUB.

    Right now, if LEE was offered 5.6x EBITDA, the equity value after adjusting for $650M in debt would about $3.50/share. However, LEE is a better run organization than either JMG or TPUB. A mere valuation of 7x multiple would value the equity at over $7/share.

    Wall Street certain undervalues LEE. I believe Berkshire’s newspaper division will eventually purchase LEE because of Buffet’s recognition that small town newspapers will continue to do well in their communities. I expect the purchase price will be multiples higher than the current $2.14/share price.

    Sentiment: Strong Buy

  • pipbustergreen pipbustergreen Feb 29, 2016 7:31 PM Flag

    Looks like you will nail the $655M projection. They reported today debt at the end of February stood at $660M. The debt keeps melting away and will continue to do so with their strong cash flow.

    Sentiment: Strong Buy

  • Reply to

    Why is the share price so cheap?

    by bamavestor Feb 12, 2016 8:46 AM
    pipbustergreen pipbustergreen Feb 16, 2016 7:59 PM Flag

    Deadcat,

    Some good comments to add to the conversation giving Bama more information/perspective about LEE. I have added to my LEE position by about 50% in the past month. But I by no means advocate putting all ones eggs in one basket. For value investors, a lot of good opportunities out there. In the past two months, besides LEE, I have bought F, CMI, GME, POT, GEF, IPHS, RYAM and SSI. I also like GRMN but have not pulled the trigger on it as I think it will break below $30.

    Sentiment: Strong Buy

  • Reply to

    Why is the share price so cheap?

    by bamavestor Feb 12, 2016 8:46 AM
    pipbustergreen pipbustergreen Feb 14, 2016 4:42 PM Flag

    Two reasons - Newspapers and Debt. The market loathes newspaper companies, particularly ones loaded with debt, i.e. LEE. Revenues have been declining for over a decade and likely will continue to decline in 2016. Only 44% of the shares are held by institutional investors and only one analyst follows LEE for which a BUY rating was given.

    LEE saddled itself with huge debts in an ill-timed purchase of Pulitzer over a decade ago just as print revenues started to decline. LEE has adjusted with prudent cost control and has been moving to transform into a digital media provider in its markets. Its near monopoly in most of its small/medium markets provides strong cash flow that has enabled it to pay down almost $1B in the last decade. It had $163M of EBITDA last year and this strong cash flow will continue for years to come with debt continuing to be paid down.

    LEE has been growing its digital revenues very nicely at a 16% CAGR. If you just assume the digital revenue growth at only 12% going forward, print declines 15% annually going forward (LEE’s print decline has been single digits) and subs are flat, the revenue decline will bottom by the end of the decade with EBITDA still above $130M per year at the trough, more than ample to pay down debt and eventually start paying a dividend (2019 most likely).

    LEE is a screaming BUY. The only analyst who has taken the time to review the company agrees. The market is very short term focused. For a long term investor, this stock will be a multiple bagger from a $1.25/share price.

    Sentiment: Strong Buy

  • Reply to

    Buffett

    by huntingdogboone Feb 4, 2016 12:12 PM
    pipbustergreen pipbustergreen Feb 4, 2016 9:14 PM Flag

    Agreed. Cash flow is the name of the game and LEE will generate strong cash flow for years to come. The digital growth will continue to grow nicely and eventually will overcome the print revenue decline. LEE will continue to pay to the down the debt as they have in the past, almost $1B in the last decade. Buying shares at this pricing is a gift.

    Sentiment: Strong Buy

  • pipbustergreen pipbustergreen Jan 30, 2016 10:19 AM Flag

    Longtime,

    Good to see you back on the board. LEE spent over $30M in 2014 to refinance the debt for the best deal they could get to extend the maturities way out to 2019 and 2022 so they did not have to worry about refinancing and took bankruptcy worries out of the picture. The first term loan should be extinguished in 2018 (due 2019) at which point LEE will start to pay a small dividend to shareholders. The 2nd term notes (12%) due in 2022 will be likely paid back in 2020 from ongoing stable cash flow. They can start paying this debt back at par in 2017. The remaining Notes (9.5%) will likely be refinanced in 2020 would be my best guess.

    Hope you are taking advantage of these gift prices the market is offering for LEE. I added to my position this past week.

    Sentiment: Strong Buy

  • After reviewing this past week’s Noble presentation, I am convinced that the market does not appreciate the value of LEE. LEE’s cash flow continues to remain strong as they had EBITDA of $163M in 2015 with margins above 22%, best in the industry. Digital revenues continue to grow at 16%+ CAGR and TownNews is now the leading Content Media Provider in the newspaper industry and is growing nicely. And the insurance settlement of $30.5M reported last week is some welcome news and this cash will be used to further pay down debt which was down to $704M at the end of December.

    I am not saying all LEE’s problems are behind them as print revenues will continue to decline. Overall revenues declined 1.8% last year due print revenue. Market predictions are that print revenue will be down 4% again in 2016. If that happens at LEE coupled with digital growth of 16% and assuming flat subscription revenues, I predict overall revenues will decline 2% to $635M in 2016. At this revenue level, they should earn $0.51/share (ex items) versus $0.43/share last year. EBITDA should be in the $155-160M range and with the insurance settlement, they should pay down over $90M in debt this year. LEE’s forward P/E is about 3 and FCF/share is about 1.5 both incredibly low valuations. But these valuations are too low considering LEE strong cash flow and financing in place through 2022.

    I believe that the newspaper industry will continue to consolidate with Gannett and Berkshire Hathaway continuing to be the main buyers. Both GCI and BK have expressed that they would like to be in markets which are LEE’s core. CGI recently announced they would buy JMG for $12/share, which is valued at 12.5x EBITDA. If LEE was purchased at a similar valuation assuming debt assumption of $650M (by time a transaction would complete), the price that would need to be paid for LEE’s equity would be over $20/share. At a modest 7x, the price would be about $8/share.

    LEE looks like a nice buy at $1.51/share.

    Sentiment: Strong Buy

LEE
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