Natexis Bleichroeder on Hollywood Media (HOLL)

Natexis Bleichroeder analyst Jeff Shelton initiated coverage on Hollywood Media (ticker: HOLL) September 14th. For a company of its size, Hollywood Media is horrendously complicated: it has a broadway ticketing business (Broadway.com) that competes with Ticketmaster, a nascent cable TV channel (Hollywood.com TV), a consumer web site (Hollywood.com), a movie info data business and a 26.2% stake in MovieTickets.com. Here's how Mr. Shelton attempts to value the company:

12 month "fair value estimate", he says, is $7.50. He uses three methods: discounted cash flow, sum of the parts and 5.3x multiple on 2007 forward EBITDA. They all come out to $7.50.

Quick comment: Don't you just love the way different sell-side valuation methods just happen to triangulate to exactly the same valuation estimate? And have you ever wondered why it's always a nice round number? (I'm allowed to taunt them - I was a sell-side analyst myself.)

Here's how he gets to the sum-of-the-parts valuation, which is probably the most robust of the three:

• Broadway Ticketing worth $113 million (15x 2006 EBITDA estimate of $7.5 million)
• 26.2% stake in MovieTickets.com worth $65 million (based on past investment values)
• Data business worth $46 million (7.5x 2006 EBITDA of $6.1 million)
• Hollywood.com worth $30 million (no numerical justification given)
• Hollywood.com TV (cable channel) worth $20 million (20 million households at $1 per household, conservatively low in comparison to $20 per household for a usual ad-supported cable TV network).
• Deducting $40 million for corporate overhead, that gives $248 million value
• Then add debt, working capital, minority investment, NOLs, etc. Total: $273 million.
• Divide by 36.3 million shares = $7.50 per share

Hollywood Media, meanwhile, has been a lousy performer. The company has consistently exceeded its projected expenses, there's been insider selling, and there's no sign of the potential merger of MovieTickets.com and Fandango - which would likely create a highly lucrative monopoly provider of online movie ticketing.

Full disclosure: at the time of writing I'm (sufferingly) long HOLL.

Related:

• All Internet Stock Blog articles on Hollywood Media.
• The complete list of Internet stocks (and links to articles about them) covered by The Internet Stock Blog.
• The complete list of media stocks covered by The Media Stock Blog.

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