Rogers Has At Least $5 Billion Of Hidden Value

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 |  About: Rogers Communications Inc. (RCI)
by: Baskin Financial Blog

Investors in Rogers Communications (NYSE:RCI) have every right to be in a sour mood. Competitors, BCE and Telus (NYSE:TU), have seen their stocks go straight up, while Rogers has done nothing. With a new CEO trying to make a name for himself, it may be time to shake things up. And shake them up in a dramatic fashion.

Rogers Communications has at least $5B in value in the company that is not being properly valued. That’s 25% of the company’s current market value. Here’s how our management can unlock value.

1) Rogers has close to $1B of securities in other publicly traded securities. It owns a big stake in Cogeco Cable. As a shareholder, I don’t need to own a stock that owns stock in other companies. Sell it, and use the proceeds to reduce debt, buyback stock or increase dividends.

2) Rogers has at least $2B worth in sports franchises. Sports teams are hot. Celebrities and billionaires want to own them and clearly overpay for them. Rogers Communications should strike while the iron is hot and look to spin off its sports franchises to the public. Rogers owns the Toronto Blue Jays, the Rogers Centre (Skydome for you old folks) and 37.5% of Maple Leaf Sports Entertainment (MLSE) which owns the Toronto Maple Leafs, the Toronto Raptors, the Toronto FC Soccer team, the Air Canada Centre, restaurants, some real estate and three specialty sports channels. Well it’s hard to put a value on these assets, but here’s my best guess.

In October 2013, Bloomberg said that the Toronto Blue Jays were the 12th most valuable team with about $350M of revenue. They slapped a value of $950M on it. Now that the Jays are winning a little more and with the passage of time, I’m sure we can go as high as $1B. Let’s move on to MLSE. In 2012, Rogers paid $575M to acquire 37.5%. This valued the company at $1.5B. I think the company is now worth at least twice that. With Steve Ballmer offering to buy the L.A. Clippers for $2B, a benchmark has been set. In 2013, Forbes said the Raptors are worth $500M plus. C’mon, close to $1.5B is more likely. Then you have the Maple Leafs. Forbes said the company was worth $1.2B in 2013. Finally, you have the Toronto FC, which Forbes said was worth $120M in 2012. Let’s use $150M now. As for the other assets, let’s say another $100M. Add it all up and you get about $3B. 37.5% of MLSE at $3B plus $1B for the Jays gets you $2.1B. And if you need any further confirmation, look how well MSG’s stock has done recently. It owns the New York Knicks, Rangers, Madison Square Gardens arena as well as specialty channels.

3) Rogers owns close to 6,000 cell towers across Canada. American Tower (NYSE:AMT), a publicly traded cell tower company, owns 68,000 towers and has a valuation of $35B. That’s over $500,000 USD each per tower. Let’s be conservative and give Rogers a lower value of $400,000 per tower. That gets you $2.4B USD. A publicly traded Canadian cell tower company would get a huge following given the strong recurring revenues, high operating leverage and limited competition.

There you have it. $1B in securities, at least $2B in sports franchises and at least $2.4B in cell towers. That’s a lot of dry powder to get Rogers’ stock back on track.

Disclosure: The author and clients of Baskin Financial own shares in Rogers Communications.