Anyone here dream of being a local newspaper mogul? A William Randolph Hearst? A younger Warren Buffet? How would you like to own a melting ice cube? You got white gloves on? How about a ketchup popsicle? How about another metaphor that doesn’t really apply to the situation?
I guess not a lot of people want to own newspapers anymore (imagine that!), which is why FP newspapers trades at around 2x EBITDA. That and it’s a PA trade that’s massively illiquid means you will really OWN it.
FP Newspapers Inc. owns securities entitling it to 49% of the distributable cash flows of FP Newspapers, which owns and operates the Winnipeg Free Press, along with several other Manitoba based news and media publications that are available both in print and digital formats.
The obvious concern with owning newspaper assets is the declining circulation and advertising revenue and resulting cash flows over time. However, circulation revenue has been quite flat for the business over time and revenue and EBITDA declines have outperformed national averages of negative double-digits.
Another key reason for the low valuation is likely due to poor recent capital allocation. In August of 2022 FP Newspapers debt financed $10mm of press equipment to create efficiencies and expand capacity in commercial printing (this is in other revenue above) only to in March of 2023 announce it will not be proceeding with actually utilizing the press due to issues with compatibility and market conditions in commercial printing. These assets have not been sold, which might provide some additional upside in the valuation, but I’m not giving them credit for that.
That said, prior to this blunder – capital allocation appears to be relatively straightforward with distributions to shareholders and debt paydown being the main uses with little CapEx historically. Management appears to be focused on the core business and debt reduction after this blunder.
Based on M&A comps, I think the business is worth 3x – 4x EBITDA, which provides material upside from here.
I do not hold a position with the issuer such as employment, directorship, or consultancy. I and/or others I advise hold a material investment in the issuer's securities.
Are you sure you want to close this position FP Newspapers?
By closing position, I’m notifying VIC Members that at today’s market price, I no longer am recommending this position.
Flag FP Newspapers for Removal
Are you sure you want to Flag this idea FP Newspapers for removal?
Flagging an idea indicates that the idea does not meet the standards of the club and you believe it should be removed from the site. Once a threshold has been reached the idea will be removed.
You Cannot Submit Message ... Yet
You currently do not have message posting privilages, there are
1 way you can get the privilage.
You can apply for full membership by submitting an investment idea of your own. Or if you are in reactivation status, you need to reactivate your full membership.
