Boyar Research is offering complimentary reports on three companies that we believe offer at least 30% upside from current levels. The first company is Acushnet Holdings Corp. (the maker of Titleist Golf Balls) that we estimate has upside potential of ~75%. The next company is News Corporation, which we believe in two years could have a private market value of $24.40 (current price $13.95). The last company is Howard Hughes Corporation, which we estimate offers 30% upside from current levels.
To receive our full-length reports on these companies, please click here.
Since 1975, Boyar Research has been providing independent research utilizing a private equity approach to stock market investing. Through our various publications, we provide in-depth reports profiling businesses selling below our estimate of their intrinsic or private market value. A large number of the companies we feature are not widely followed by Wall Street. Since 2009, the average return of each company profiled in our flagship publication Asset Analysis Focus has been 83% versus 53% for the S&P 500.*
So what attracts Boyar to Acushnet Holdings Corp.?
- Acushnet generates approximately 40% of its revenues and an even greater share of its profitability from consumable products, including golf balls and golf gloves, which help generate a recurring stream of revenue and cash flow.
- The ongoing rationalization of retail space dedicated to golf equipment in the U.S. (51% of Acushnet’s sales) should ultimately portend a more rational industry pricing environment. Nike’s recent exit from the golf equipment business and Adidas’s 2017 sale of its TaylorMade golf division to private equity should also result in a more favorable industry landscape.
- Acushnet’s underlying FCF-generating abilities have been masked by its pre-IPO financials, which included debt and preferred securities that were either converted to equity or redeemed. However, the Company’s underlying FCF should become apparent during the second half of 2017. GOLF initiated a robust $35 million annual dividend ($0.48/share annually; 2.4% yield) in March 2017.
- Applying an 11.0x multiple to our 2019E EBITDA projection, we derive an intrinsic value for GOLF of $32 a share, representing ~75% upside from current levels. Although the multiple that we have utilized represents a slight premium to precedent industry transactions, we believe that GOLF deserves a premium given its strong brands, recurring revenues, and strong levels of profitability (~15% EBITDA margin).
To receive our full-length report on Acushnet, please click here.
Why do we think Howard Hughes looks attractive at these levels?
- We believe that there are a number of competitive advantages embedded in HHC’s business model. They include its dominant/near dominant market position within its master planned communities, which provides pricing power and other strategic benefits; a conservative balance sheet that enables self-funding of key development initiatives; the ownership of several irreplaceable/trophy assets; and the ability to capitalize on the significant investment made by prior owners of key assets.
- The interests of HHC’s management and board are tightly aligned with shareholders, as insiders currently own ~21% of HHC’s outstanding shares. CEO Weinreb recently acquired a $50 million 6-year warrant to purchase HHC shares. He will not derive any benefit unless the HHC share price rises above current levels and will lose his entire investment if the share price remains flat.
- At the current HHC share price, we believe that investors are effectively acquiring HHC’s operating assets and the land associated with its master planned communities at a conservative value and that they are receiving Ward Village, the Seaport District, and a collection of other assets, including valuable air rights on the Las Vegas strip, for free. We value these assets at ~$66 a share, translating to a net asset value of $171 a share, representing ~33% upside from current levels.
To receive our full-length report on Howard Hughes, please click here.
What is our investment thesis on News Corporation?
- News Corp shares have underperformed since the 2013 spin-off from Fox. The Company’s controlling stake in Australian digital real estate leader REA Group and its cash hoard now represent 75% of the Company’s market cap, close to an all-time high.
- We project that News Corp, despite being inappropriately viewed as a publishing company by the investment community, is reaching an inflection point toward revenue and FCF growth due to outsized growth at its digital real estate properties and other digital assets.
- Our current intrinsic value estimate for News Corp is $18.33 per share (PV) on a sum-of-the-parts basis, utilizing conservative projections, including a terminal decline at the News & Information segment. Looking out 2 years, we estimate that the Company’s true private market value in a split-up scenario would exceed $24.40 per share.
- While capital allocation remains a concern, there are many potential catalysts to help unlock value on the horizon.
To receive our full-length report on News Corporation, please click here.
*Past performance is no guarantee of future success. These results are not audited. Asset Analysis Focus is not an investment advisory bulletin, recommending the purchase or sale of any security. Rather it should be used as a guide in aiding the investment community to better understand the intrinsic worth of a corporation. The service is not intended to replace fundamental research, but should be used in conjunction with it. Additional information is available on request. The statistical and other information contained in this document has been obtained from official reports, current manuals and other sources which we believe reliable. While we cannot guarantee its entire accuracy or completeness, we believe it may be accepted as substantially correct. Boyar’s Intrinsic Value Research LLC its officers, directors and employees may at times have a position in any security mentioned herein. Boyar’s Intrinsic Value Research LLC Copyright 2017.