Tenaris ADR Rep 2 Ord Shs T.TS.B

RE:Value of Torstar and how it could be unlocked

[Mediawatcher]

I fundatmentally agree with much of this well reasoned analysis.  I would add the following commentary:

• Company is unlikely to be broken up in a wholesale transaction, but the new CEO will assess the component parts and make a recommendation to sell off some or all of the parts that don't generate cash and near term shareholder value;
• VerticalScope on the surface appears to have been a good investment although not sure what the path to control is and not having access to the cashflow poses a significant limitation.  An IPO wiould return cash to Torstar and could either enhance dividend distribution or allow for another diversification investment.
• The Atkinson Principles have always only applied to the Toronto Star and I don't think the Voting Trust would have any appetite to own the newspaper as a stand-alone enterprise with the current economic prospects for the newspaper.  The Toronto Star needs to be part of a bigger collection of businesses to support it when the cashflow it generates is not sufficient or have a benafactor with very deep pockets (see Jeff Bezos).
• The Investor Relations couldn't get any worse, so anything the new CEO can do to promote the underlying value of Torstar would be appreciated by current and future shareholders.
• The valuation of the traditional newspaper businesses would be greatly enhanced if Torstar could build some strategic alliances with other newspaper/media companies.  Markets need to be rationalized (especially Toronto) and the race to the bottom is not going to end well for any of the newspaper companies (perhaps with the exception of The Globe if Woodbridge continues to subsidize the newspaper for sentimental reasons).  The financial performance is not going to return to pre-Internet days, but Star Media Group and Metroland would be worth considerably more in a rationalized environment.  I would add at least another $1-2 per share.
• The pension liability will I believe get resolved by interest rate adjustments and governemnt intervention, so I wouldn't deduct the full $122 million.  Reducing the pension liability could add almost $1/share, but I understand the desire to be conservative.
• At a current share price of $1.76 it is "stupid cheap" as one analyst described it not long ago.  There will be considerable room to move the dividend up when the dust starts to settle on some of the restructuring initiatives and that on its own should goose the share price.  Management has done a poor job of illuminating the value of Torstar as all investors see are huge revenue declines and management scrambling to cut costs.  The cutting isn't going to end soon, but it can't go on forever.  The new CEO we all collectively hope will deliver on the promise to unlock the value trapped inside the company.  If he doesn't this will be a painful and distressing short descent into investor Hell.
• Torstar should be worth more than $8/share by my calculation and if management can't unlock the vaule I hope Fairfax goes directly to shareholders to make the case for wrestling the company out of the hands of the Voting Trust.