Patient investors will be rewarded at more than $3/share Hi All,
Book value is one metric for assigning a value to Torstar. I prefer the liquidated value as book value is an accounting metric and does not provide for the intangible value associated with long-established brands like the Toronto Star and many of the community newspapers.
The fact the Book Value per share is almost three times higher than the share price signals the stock is undervalued for a host of reasons including the current lack of positive operating results and the incompetency factor, which is significant.
For this analysis assume 81 million shares – Voting Trust 22 million; Fairfax 29 million; Unwashed Masses 30 million.
Valuation based on what these assets at a minimum should be worth if not encumbered by the Keystone Kopps leadership – VertigoScope $2/share; Cash $.60; Toronto Star and other dailies $1.50/share; Community Brands $1.50/share; Blue Ant, Black Press, CP and all other investments $.40 – Total $6/share.
If Fairfax were to pay $6/share it would cost them $312 million to privatize Torstar. Assuming a white knight discount of $1/share Fairfax’s cash cost would be $260 million to acquire all shares. When you think Torstar not too long ago paid $182 million for 56% of VertigoScope, this would be a relative bargain.
The recent chatter about the privatization of HBC and speculation around Indigo going private has probably attracted some smart money to TS.B shares and hence the recent lift in the share price.
The 29 million shares owned by Fairfax coupled with the solid dividend should take Torstar off of the highly speculative list and this will gain additional traction as lots of cash is still floating around looking for a good home. This deal when it happens will not go out at $3/share because the Voting Trust, while as stupid as a bag of rocks and stumbling towards senility, will not give the company away. Patient investors will be eventually rewarded.