Sinclair Broadcast Group (SBGI), mcap=$1.3bn, price $18.55 vs $22.60

$SBGI pitch:
– The 2nd largest broadcaster in the US, owning/operating 193 stations across 100 markets.
– The stock is depressed due to the overhang due to the expensive Diamond Sports Group before the pandemic.
– The market is treating DSG as a negative value when in reality it should be zero due to the non-resource nature of its debt.
– Hidden value and the low valuation of SBGI’s core broadcasting business vs. comps.
– A number of different upside levers can accrete to equity value.
– Management team working on righting its wrongs and maximizing value to shareholders through repurchases, dividends, and boxing the DSG risk.

$SBGI valuation:
– Excluding DSG, the remaining business is trading at 25-30% FCF yield and 6x ’22/’23 EBITDA vs. comps at 15% FCF yield and 7.2-8x ’22/’23 EBITDA.
– At 7x EBITDA worth $32.5/share.

Exp. gain: +40% to $32.5/share in the base case. +110% in the upside scenario.

Full SBGI write-up (free guest account required):


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