one month ago i ventured the view that MMG was "fairly priced" but that the risk remained on the downside.
based on today's close of $1.70 i am prepared to make the call that NOW IS THE TIME TO BUY MMG.
The factors are these:
- annual distribution is currently in the order of 50 cents with no reason to think that this will change near term
- they have approx $400 million cash on the balance sheet, which is itself approx $1.70 per security
- the operating assets are grossly overgeared in the current environment and therefore there is real refi risk.
When the time to refinance comes around, chances are that the $400 million will be 100% applied to debt reduction.
However, if earnings fall off a cliff due to harsh economic times, or debt simply isn't available - MMG can just give shareholders the $400 million back and give the assets to the lending banks.
Therefore, your worst case scenario is a chunky distribution for a while, followed by return of your capital.
Over the weekend i will research exactly what the timing is on the refi - it has slipped my mind.
Viewed differently, this is a high quality Aussie media asset currently trading on an EBITDA multiple of just north of 5.0x. Unthinkable only a few months ago.
This is now very low risk buying due to the cash backing.
MMG Price at posting:
$1.38 Sentiment: Buy Disclosure: Not Held
