David Atterbury of Whetstone Capital, InvestPitch presentation produced by sumzero and Institutional Investor on the long case for Gray Television, Inc. (NYSE:GTN).
Gray Television business overview:
- Local TV broadcaster with CBS/NBC weighting
- In 31 mid size markets
- #1 in local news in 23 markets
- Strategic focus on college towns and state capitals – markets with above average demographics and revenue growth – 17 markets are college towns – 8 markets are state capitals
- Controlled by the Robinson Family
Why We Like Gray Today:
- Substantial leverage to 2014 political advertising
- Well positioned to grow through acquisitions using company’s new duopoly model
- Above industry local ad growth
- New retransmission contracts
- Leverage to all of the above via current balance sheet
Significant Industry Tailwinds
- Retransmission: Broadcasters continue to extract significant recurring revenue from cable/satellite providers (MVPDs) on a monthly per subscriber basis allowing MVPDs to retransmit network content
- Political Advertising: Citizens United v. FEC allows corporations, associations and unions to spend freely on political advertising – significant implication for broadcasters as 45% of political spending goes through local TV
- Auto Advertising: Pent-up demand/aging fleet driving robust ad spend
- Debt Refinancing: Companies have accessed debt markets to refinance high cost debt and fund industry consolidation
- Industry Consolidation Wave
– Significant private & private equity backed opportunities remain available for acquisition
Many value investors have given up on their strategy over the last 15 years amid concerns that value investing no longer worked. However, some made small adjustments to their strategy but remained value investors to the core. Now all of the value investors who held fast to their investment philosophy are being rewarded as value Read More
- 50% of operators own less than 15 stations and are non-public
- More privately owned properties will likely sell in 2014
- Public market consolidation likely to follow
– Broadcasters with scale can better negotiate with networks, MVPDs and national advertisers
Industry Valuations
- 2014/2015 EV/EBITDA Averages
– Gray Television, Inc. (NYSE:GTN), Nexstar Broadcasting Group, Inc. (NASDAQ:NXST), LIN Media LLC (NYSE:TVL) trade at ~8.5x
- Pre recession multiples approached 10x EV/EBITDA
– But these are better businesses now:
– Retransmission, political and digital revenue streams have greatly expanded
– Advertising revenue appears to be benefitting from the decline of the local newspaper
– Balance sheets have significantly improved
H/T Curry Goat
David Atterbury of Whetstone Capital: Long Gray Television
Updated on