Ever on the hunt for value, I came across A.H. Belo Corporation (AHC), the owner of The Dallas Morning News newspaper. Interesting situation to watch. Here are some highlights:
Share price – $4.50
Market cap – $97.6 million
Earnings Per Share:
2017 – $0.46
2018 est. – $0.25
2019 est. – $0.55
Cash – $57 million
Debt – $0
Estimated dividends 2018 and 2019 – $0.32 each year
They’re digital subscriptions grew 44% last quarter, but of course their print circulation is in a long term decline.
Let’s recap what we’re looking at there:
This is a declining business, but the price appears very cheap.
It has a 7% dividend yield and the dividend will be covered by 2019 earnings. Additionally, the company has $57 million of cash that could fund the dividend for seven years. So the 7% dividend yield looks relatively safe.
The PE is 18 on this year’s earnings, but the company is expected to earn 55 cents a share in 2019 and 65 cents in the years following that. So we’re looking at a PE of 8 on next year’s earnings.
So if we were to buy the entire company for $98 million, we’d get $57 million back immediately, as that’s the cash on the books and they have zero debt. And we’d be getting a 7% dividend, and earning 12.5% on our investment ($0.55 earnings on $4.50 a share purchases price).
Even though it’s a declining newspaper business, it’s still earning money, there’s no debt, over 50% of the market cap is in cash, and it pays a 7% dividend that’ll be covered by earnings.
The Dallas Fort Worth metro has the fastest growing population in the country, and that bodes well for the local newspaper.
I’ll be continuing to dig into this company and trying to learn the economics of their digital business. I’m intrigued.
I also found out via this recent 2018 Q2 earnings call transcript that they’re planning to sell their headquarters, and they plan to add $30 million to their cash pile from that sale.
That will put them at around $85 million of cash, and a market cap of $98 million, with no debt.