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Manchester United plc
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=== What's the Current Value of Manchester United === As at 30th June 2023, the stock (NYSE: MANU) closed at $24.38 per share. Given the current takeover negotiations with external bidders, we have seen increased price movement (mostly positive) as investors are excited by the potential sale to either the Qatari family of Jim Ratcliffe. As as the time of writing this report, no clear winner has emerged. That said, a plain vanilla valuation approach of the total market capitalization plus the net debt is shown in the table below to get what we understand as the current Enterprise Value. {| class="wikitable" |+ ! colspan="4" |MANU Current Valuation - June 2023 |- |Share Price (@30/06) |[$] | |24.4 |- |Shares Outstanding |[#M] | |163 |- |Equity Value |[$M] | |3,974 |- |Add: Net Debt at June 2022 |[$M] | |631 |- |'''Enterprise Value''' |[$M] | | '''4,605''' |} Ideally, multiple valuation methods such as the Discounted Cashflow, trading comps, Dividend Discount Model, Residual Income, etc. are employed to arrive at an acceptable valuation range for a firm. However, given the peculiarities of the Sports and Entertainment Industry which Manchester United operates in, we cannot accurately apply the aforementioned valuation techniques for the following reasons: # '''Discounted Cashflow''': Relies on a company generating positive cashflows, and in this case, Manchester United hasn't consistently generated positive cashflows in the last five years. # '''Trading Comps''': There aren't many direct public comparables to Manchester United. However, we managed to apply the multiples from the closest comps that we could find and got a decent result. Results from the trading comps estimated the Enterprise value at $3.5B. # '''Dividend Discount Model''': While MANU has managed to pay dividends consistently between 2017 and 2021, dividends are flat at $0.09/share, hence, it can not be used to arrive at a near accurate valuation for the stock. In addition, dividends have not been consistent in 2022 which makes it even harder to estimate the stock value using the DDM. For the reasons mentioned above, we have identified quantitative factors to be considered in the valuation of Manchester United. We find the following factors to be crucial in the valuation of Manchester United and other related companies: # '''Brand Value''' - According to Brand Finance 2023<ref>https://brandirectory.com/rankings/football/</ref>, Manchester United is now the fourth most valuable football brand in the world behind only Manchester City, Real Madrid, and FC Barcelona. The brand is valued at β¬1.4 billion, with a Brand Strength Index (BSI) of 92.5/100 and an AAA+ rating. For context, the brand is defined as the trademark and associated intellectual property<ref>https://www.statista.com/statistics/234493/football-clubs-in-europe-by-brand-value/</ref>. # '''Size of Fanbase''' - According to Footgoal<ref>https://footgoal.pro/top-10-football-clubs-with-most-fans-in-the-world-in-2021/</ref> and as at June 2023, Manchester United has the third largest social media following in the world clocking at around 209.4M across all platforms. This is behind only the Spanish giants; Real Madrid and FC Barcelona in first and second place consecutively. # '''Performance on the pitch''' - While this is factored into the brand value and net income calculations, the significance of on-pitch performance of football clubs can not be overstated. In the last season (22/23), we saw Manchester City complete the treble and that had a massive effect on the brand value propelling them into the most valuable football brand in the world. From an acquisition point of view, if the acquirer thinks he can build a team to achieve similar on-pitch performances, then a higher premium would be attached to the Enterprise value. While the factors mentioned above are hard to quantify, we clearly see why different investors with varying rationales might be willing to pay a hefty premium to own a MANU stock. It's a prestigious asset to own.
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