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- Ascent Capital trades at rich multiples to its peers and recent M&A in the security space.
- Ascent faces increasing competition and upward pressure on the multiple it pays to acquire contracts.
- Based on EV/RMR (Recurring Monthly Revenue) multiple of 50x, still at a significant premium to ADT’s 38x, Ascent would be valued at $52 a share – implying 25%+ downside.
- Market Neutral Strategy: Long ADT, Short ASCMA.
- Ascent Capital is a holding company which has undergone considerable change; now, its primary asset is 100% ownership of Monitronics, a home security services and home automation business.
- Monitronics operates in a fragmented market, characterized by customer acquisition costs, highly recurring revenue and a capital-light business model.
- Low penetration rates and opportunities to sell adjacent, value-added services such as home automation provide growth opportunities.
- Recent sell-off and solid earnings report create excellent buying opportunity before the market re-rates recent, accretive acquisition of security network.