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Recently, I discussed the Sinclair Broadcast Group (NASDAQ:SBGI) with Clay Mahaffey, Chief Analyst of the National Eagles and Angels Association on the "Stock Watch" segment of my nationally syndicated radio program "The George Jarkesy Show". Below is the discussion we had on the show where we discussed the prospects for SBGI and its media broadcast operations in 2012. We also touched on the role political advertising may play in SBGI's fortunes. The stock is currently trading at $11.85 as of close on March 23rd.

George Jarkesy: Thanks for being on the George Jarkesy Show.

Clay Mahaffey: How are you doing, George?

George Jarkesy: Fantastic. I know you and I spoke earlier today on this [JP Morgan: (NYSE:JPM)] $15 billion stock buy-back. It's a big number, isn't it?

Clay Mahaffey: That's amazing.

George Jarkesy: JP Morgan's got the cheap money from the U.S. Government and now they're out spending it buying their stock back.

Clay Mahaffey: George, I thought they were a bank. Weren't they lending the funds?

George Jarkesy: Well, I guarantee you small business in America is not getting it. They want gold, underwater, with fire insurance to get a loan down at the bank these days for small business. I was on a conference call today where the bankers ware shaking their heads to the guy that was looking for the loan. It was a small entrepreneur who has a deal with a major U.S. corporation. It was jumping through many, many hoops to try to get that done as I made those introductions. But Clay, let's talk about making money today. What can our listeners do today in buying a stock that could make them money? What have you got?

Clay Mahaffey: George, today I want to talk about Sinclair Broadcast Group. It trades on the NASDAQ symbol SBGI. I like this stock based on its valuation. Sinclair is a media company and TV broadcaster. They operate 74 stations in 24 states, 45 markets. This is a cash flow business. Last year they had $145 million in free cash flow, which is about $1.80 a share. This is their net cash after any investments that they've made.

The background here is that the company was pummeled in the recession. From the '07 high, it lost 90 percent of its valuation, down to $1.00 in 2009. They took action. They cut costs. They eliminated the dividend. Slowly and steadily, the stock came up to $13.00 a year ago. Now it's trading under that, about $11.72 yesterday. This is only six times next year's cash flow, which I think is a good point to build a position.

Like I said, they restored the dividend. That's yielding 4.1 percent. They have nine broadcasting assets of about $2.00 per share. In the last three or four months they've made $500 million in acquisitions, which were added to their cash flow in 2012 in the first year. One of the problems is they have $1.2 billion in debt. But I don't think they're going to have any problem making the payments on that.

Remember, George, I have to remind you that this is a political year. There'll be massive spending on TV ads. It's already started. Month after month it's going be increasing through November 4th of this year. They will benefit from that.

George Jarkesy: So does their debt bother you because their net worth is out of line? Is it the debt service?

Clay Mahaffey: No. They have coverage about 4.7 times the interest payments, cash flow to interest, so it's secure. It is a lot. They're being aggressive in this market. George, there's another issue here.

George Jarkesy: Wait a minute. Let's back up a little bit. I don't think that taking 20 percent of your free cash flow and servicing debt is aggressive. If that was my company, I would say that that's conservative.

Clay Mahaffey: They could take on more. There's no question about it.

George Jarkesy: My mentor, Big John, used to have this saying: "It's not the debt, it's the carry." If they've got good, low interest, long term debt that's not going to jump up and bite them in two years, it comes up or has some kind of ratchet that takes it from 5 percent interest to 20 percent interest or something crazy like that, that seems in line. Now, the $1.80 per share of cash flow is that next year's or last year's?

Clay Mahaffey: That's last year's. I think they'll do at least $2.00 this year, 2012. I think the full year effect, the political ads - as you know, new car sales are projected to increase almost ten percent this year, and they're going get a big boost from that because auto advertising is a TV medium. Those are some of the upsides. With the auto recovery and the political ads, and also the FCC is proposing an auction of this broadcast spectrum. Each of those stations is probably worth $30 million if they auctioned off that spectrum to the cable companies.

George Jarkesy: So what does that mean? How many of those do they have?

Clay Mahaffey: 74. That's a lot.

George Jarkesy: That's a lot of money! Does that exceed their market cap?

Clay Mahaffey: Good question. It's within 10 percent.

George Jarkesy: Sinclair Broadcast Group, symbol S as in Sam, B as in boy, G as in George, I as in Idaho, SBGI. It's about $11.00 a share. Thank you very much, Clay Mahaffey. We're looking forward to Stock Watch tomorrow.

Clay Mahaffey: Okay. Thank you, George.

George Jarkesy: And we're going see you in person on March 29th at the Eagle and Angel luncheon.

Clay Mahaffey: Definitely.

George Jarkesy: All right. See you then.

Disclosure - Neither George Jarkesy nor Clay Mahaffey own shares in Sinclair Broadcast Group

Disclaimer: The George Jarkesy Show or the National Eagles and Angels Association are not investment advisors. Any content published by The George Jarkesy Show or the National Eagles and Angels Association does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. All content on The George Jarkesy Show Website and The National Eagles and Angels Association is produced independently of any advertising relationships.

Source: Sinclair Broadcast Group: Election Year Stock