Spectrum Valuation Puts Sinclair At The Top

A Wells Fargo analysis values the station group’a spectrum at $2.9 billion, or $35.74 per share, 35% above the company’s May 16 closing price. “We think it important for investors to focus on the broadcasters’ most important asset — the about 300 MHz of nationwide spectrum that is owned … collectively by this industry,” the report says.

Sinclair Broadcast Group’s stock may be the best publicly traded broadcast stock value on the market currently — at least when the value of the spectrum the Baltimore-based company controls though its TV stations is considered, according to a study released Friday by Wells Fargo Securities.

Indeed, the study, TV: Spectrum Values Provide a Pretty Nice Floor, values Sinclair’s spectrum at $2.9 billion, or $35.74 per share, 35% above the company’s May 16 closing price of $26.55.

Using the same analysis, the study says that the spectrum value of stock for Media General and Belo Corp. were 25% and 23% above their May16 closing prices, respectively.

“While the broadcast television model continues to come under scrutiny due to emerging technologies (whether it be the DVR, Aereo, VOD, etc.), we think it important for investors to focus on the broadcasters’ most important asset — the about 300 MHz of nationwide spectrum that is owned (really “rented” via FCC licenses) collectively by this industry,” the report says.

The report goes on to say the value of the broadcast spectrum was based on the prices generated by a 2008 FCC spectrum auction, adjusted for inflation.

“Station groups with the highest spectrum values as a percent of their current market caps were those with the greatest number of UHF stations in the largest DMAs,” the report adds. The other publicly traded broadcast stocks that had relatively high spectrum floor prices above their May 16 closing prices were LIN TV Corp., at 19%, and E.W. Scripps Co., at 17%, according to the report.

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The report says that Comcast Corp.’s spectrum was valued at $5.6 billion while CBS’s was valued at $5.4 billion. But apparently because station ownership is a relatively small part of their overall businesses, the spectrum value of their shares were significantly below their May 16 closing prices.


Comments (3)

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Brian Bussey says:

May 17, 2013 at 4:34 pm

this reads like break up valuations by Mitt Romney’s vulture capitalist buddies

Mark Gordon says:

May 17, 2013 at 5:54 pm

The flaw with this analysis is that it ignores that Sinclair and the other publicly-traded pure-play TV broadcasters generally own stations in small and mid-sized markets that will be easily “repacked” and as such, their stations will have no recognizable spectrum value, at least for purposes of the proposed 2014 auctions. Granted, these companies are unlikely auction participants in any event, they will continue to control signifcant amounts of spectrum in small amrkets, and who knows what changes the very long-term will ultimately bring? (wholesale broadband business models for television station operators?) – – but valuing these companies, today, based on spectrum value is a real stretch

Paul Hoagland says:

May 19, 2013 at 10:48 am

I’m not sure how much credence I put in any analysis or valuation by Wells Fargo since I learned they were one of the underwriters of Sinclair’s latest stock offering at $27.25 per share.


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