On November 16, 2020, Madison Sq. Backyard Leisure Corp
Valuation and Suggestion
Our SOTP framework values MSG Leisure by valuing every working phase/asset individually. We worth MSG Enviornment and Advanced utilizing asset primarily based valuation. Probably the most important chunk is Madison Sq. Backyard, together with the air rights hooked up to the Backyard. We worth Chicago Theater, Radio Metropolis Christmas Spectacular, TAO Group, and Reserving enterprise utilizing EV/ EBITDA valuation. We count on that the corporate will begin recovering the losses suffered through the pandemic probably in 2HCY21, and can be capable of give attention to its operations and completion of MSG Sphere as soon as the market situations return to regular. COVID continues to impair MSGE’s working outlook for the foreseeable future materially, and the Firm continues to keep up its robust liquidity place and implement price discount efforts to navigate by way of this disaster. We arrive at a goal value of $95.00 (Beforehand: $85.00) per share for MSG Leisure, which provides an upside of 19.7% versus the present market value of $79.36 as of 11/23. We retain our Purchase’ score on the inventory. Our valuation components within the weak 1Q outcomes reported by the corporate, as the corporate’s operations stay affected by the COVID-19 pandemic, which led to the closure of many of the venues since mid-March. Dangers to our score embrace the influence of COVID on the timing of venues reopening/ resumption of occasions and sphere development prices & related delays.
Replace Within the present uncertainty interval, the Firm has taken steps to cut back bills and preserve its liquidity. In August, the Firm applied a workforce discount and important spending cuts, leading to roughly $100 million in estimated working expense financial savings on an annual foundation. MSGE has resumed the development of MSG Sphere in August 2020, which was suspended in April because of COVID-19 associated components. The continued results of the pandemic additionally influenced the Firm’s determination to elongate its development timetable for MSG Sphere in Las Vegas, which the Firm expects to open within the calendar yr 2023.
In November 2020, the Firm accomplished a $650 million debt financing within the type of a five-year senior secured time period mortgage at a subsidiary of MSG Leisure that owns and operates the Firm’s core stay leisure enterprise. The time period mortgage collateral bundle consists of fairness pursuits in sure of the Firm’s venues and the Christmas Spectacular Starring the Radio Metropolis Rockettes manufacturing however excludes the Madison Sq. Backyard Enviornment. MSG Sphere and Tao Group Hospitality will not be within the time period mortgage borrower group. The financing bolsters the Firm’s already robust liquidity place, additional strengthening MSG Leisure’s capability to help its core companies by way of this shutdown of its venues. Additionally in November, MSG Sports activities terminated its $110 million New York Knicks delayed draw time period mortgage, and its $90 million New York Rangers delayed draw time period mortgage, each with MSG Leisure. These services, which had been undrawn, had been scheduled to mature in October 2021. The termination of those services removes a possible near-term obligation for the Firm.
Replace on MSG Sphere
The Firm has revised its processes and development schedule for the MSG Sphere, offering for a considerably lowered spend in Fiscal Yr 2021 and a lengthened timetable that allows the Firm to protect money within the near-term. The Firm now expects to open MSG Sphere in Las Vegas within the calendar yr 2023. In reference to its prolonged development timeline, the Firm has lowered its anticipated near-term spending on expertise and content material improvement for MSG Sphere. By means of September 30, venture to-date development prices incurred on MSG Sphere had been roughly $556 million, which included practically $72 million of accrued prices that weren’t paid as of September 30, and is web of $65 million that the Firm obtained from the Las Vegas Sands
Different Enterprise Replace
The NBA introduced its 2021 season will begin on December 22. Almost about live shows, whereas the present atmosphere is fluid, MSGE stated that it has seen robust demand from each artists and promoters with complete live performance bookings up throughout all of its venues. This improve is led by the Backyard, which is presently pacing up roughly 50% for the CY2021 as in comparison with CY2020. Additionally, regardless of not having any important reserving exercise in 1HCY21, the corporate has stated that it expects a powerful schedule in 2HCY21, which is shaping as much as be one of many busiest ever. MSGE has added many new exhibits to its calendar, and over one-third of the occasions booked for 2021 are new fairly than rescheduled. Additionally, for the rescheduled exhibits roughly 75% of ticket holders have chosen to maintain their tickets regardless of being supplied with a refund choice.
In 1Q21, income was $14.4 million, down 91.9% YoY as in comparison with $178 million within the 1Q20. The COVID-19 pandemic has immensely impacted the revenues, as the corporate’s 5 leisure venues have been closed since mid-March as a result of pandemic. This has additionally affected funds beneath the Enviornment License Agreements, sponsorships, suite licenses and in-venue promoting. In 1Q21, Working loss elevated by $58.5 million to $126.6 million as in comparison with $68.1 million in 1Q20, whereas Adjusted Working loss elevated by $37.5 million to $67.7 million, as in contrast $30.1 million in 1Q20. Within the quarter, the Web loss was $94.4 million, and Diluted EPS attributable to shareholders was damaging $3.69 per share, as in comparison with damaging $2.33 per share within the prior-year interval. The Firm ended the primary quarter with $965 million of money, which represented a web discount of $279 million in comparison with June 30 stability of $1.244 billion. This $279 million discount included roughly $66 million of non-recurring gadgets or funds associated to fiscal 2020 actions, together with $15 million of money funds associated to August workforce restructuring, $15.5 million in taxes associated to the acquire on the Discussion board sale, and $35 million associated to fiscal 2020 compensation funds. The remaining $213 million was pushed by $68 million of operational money burn for the quarter, $112 million of capital expenditures, and roughly $34 million associated to different working capital outflows.
The Leisure phase recorded income of $7.6 million in 1Q21, down 93.7% YoY, as in comparison with $119.7 million in 1Q20. The lower within the income was primarily as a result of closure of the Firm’s venues due to the Covid-19 pandemic, which led to lower of $70.4 million in event-related revenues, $19.6 million in suite license price revenues, and $11.6 million in venue-related signage and sponsorship revenues. In 1Q21, Working loss elevated to $110.7 million, as in comparison with $67.4 million within the prior-year interval, whereas Adjusted Working loss elevated to $58.3 million in 1Q21, as in comparison with $35.6 million in 1Q20. These primarily replicate the lower in revenues, partially offset by decrease direct working bills and, to a lesser extent, decrease promoting, common and administrative bills. Furthermore, the rise in working loss was additionally impacted by $19.9 million of restructuring expenses associated to the Firm’s full-time workforce discount in August 2020.
Tao Group Hospitality
The Tao Group Hospitality phase recorded income of $7.2 million in 1Q21, down 87.7% YoY, as in comparison with $58.6 million in 1Q20. The lower within the income was primarily as a result of closure of its venues because of the COVID-19 pandemic, which lowered eating and nightlife venues income by $25.7 million, whereas capability restrictions at reopened venues lowered revenues by $20.9 million. In 1Q21, the phase reported Working lack of $11.3 million, as in comparison with Working revenue of $3.3 million within the prior-year interval, whereas Adjusted working loss in 1Q21 was $9.1 million, as in comparison with a revenue of $5.6 million in 1Q20. These primarily replicate the lower in revenues, partially offset by decrease direct working bills and, to a lesser extent, decrease promoting, common and administrative bills.
Our SOTP framework values MSG Leisure by valuing every working phase/asset individually. We worth MSG Enviornment and Advanced utilizing asset-based valuation. MSG additionally has remaining air rights hooked up to the Backyard. As per trade sources, Backyard has about 1.4 million sq ft of unused air rights, and our estimated worth for MSG (together with air rights) stands at $1.32 billion. We worth Sphere at a 20% low cost to price. We’ve additionally factored in Company bills of ~$975 million (excluding MSG sphere). We worth Chicago Theater, Radio Metropolis Christmas Spectacular, TAO Group, and Reserving enterprise utilizing EV/EBITDA valuation. We worth Radio Metropolis Christmas Spectacular at approx. $320 million. Whereas we use 8.0x a number of for the TAO Group (77.5% stake valued at approx $240 million), that is conservative, given the elevated worth of the portfolio since MSG has taken management. We worth Bookings enterprise (together with NCAA video games, Boxing, WWE) at approx. $80 million, respectively. We assign EV/EBIDTA a number of of 8x to Chicago Theater, and Radio Metropolis Christmas Spectacular, TAO Group, and Reserving enterprise (together with different lease ventures). MSG Leisure additionally consists of investments in Boston Calling, Townsquare Media
Madison Sq. Backyard Leisure Corp
Madison Sq. Backyard Leisure Corp. (MSG Leisure) is a frontrunner in stay leisure experiences. The Firm presents or hosts a broad array of occasions in its numerous assortment of venues: New York’s Madison Sq. Backyard, Hulu Theater at Madison Sq. Backyard, Radio Metropolis Music Corridor and Beacon Theatre; and The Chicago Theatre. MSG Leisure can also be constructing a brand new state-of-the-art venue in Las Vegas, MSG Sphere at The Venetian, and has introduced plans to construct a second MSG Sphere in London, pending obligatory approvals. As well as, the Firm options the unique manufacturing – the Christmas Spectacular Starring the Radio Metropolis Rockettes – and thru Boston Calling Occasions, produces the Boston Calling Music Competition. Additionally beneath the MSG Leisure umbrella is Tao Group Hospitality, with leisure eating and nightlife manufacturers together with Tao, Marquee, Lavo, Avenue, Magnificence & Essex and Cathédrale. For FY20, the corporate reported revenues of $762.9 million.