Tribune Media: Undervalued Assets

06/24/2016 8:00 am EST

Focus: STOCKS

Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

The concerns that TV is dying is an overhyped and pessimistic view; in the wake of declining share prices and negative investor sentiment, some value opportunities are now emerging, explains Ian Wyatt, editor of Million Dollar Portfolio.

One of those undervalued situations is Tribune Media (TRCO), a multimedia corporation with a collection of diverse assets that range from online job sites, cable television networks, digital properties and real estate holdings.

Tribune's history dates back to 1847 with The Chicago Tribune. Following a bankruptcy, the company split into two companies; Tribune Publishing (TPUB), which owned the newspaper assets, and Tribune Media, which owned the remaining media assets.

Tribune Media's assets include 39 local television stations, the well-known WGN cable network, and a 32% stake in online job site CareerBuilder.

In partnership with Scripps Networks Interactive (SNI), Tribune Media owns a minority 31% stake in Television Food Network; that partnership also owns the Food Network and Cooking Channel.

Tribune Media owns 78 properties with 7.5 million square feet and 1,100 acres of land. Two of the premier properties – Chicago's Tribune Tower and Los Angeles Times Square – are now on the market.

Tribune Media owns broadcasting spectrum that could be very attractive to companies in the telecom sector. It also owns a 5% equity interest in the Chicago Cubs.

Tribune Media is a challenging company to value; however, my view is that the current market price for the stock grossly undervalues the company’s assets.

The firm CEO believes this to be the case as well. He's been using Tribune Media's significant free cash flow to reduce debt and buy back stock.

Tribune Media is a challenging company to value; however, my view is that the current market price for the stock grossly undervalues the company’s assets.

The company’s CEO believes this to be the case as well. He's been using Tribune Media's significant free cash flow to reduce debt and buy back stock.

To value this company, you must look beyond price-to-earnings, price-to-sales or other more common valuation metrics. The best way to value this stock is to look at the company’s assets.

Overall, my analysis values the company at $5.4 billion on an enterprise value basis, equal to $59.39 a share — a level I’d expect the shares to reach within 1 to 2 years.

Tribune Media stock offers investors healthy appreciation upside from these levels. At the same time, the asset rich balance sheet should reduce any considerable downside risk from the recent share price in the high $30s.

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Ian Wyatt, Editor of Million Dollar Portfolio

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