Talk:Manchester United plc

Valuation

So far it’s been challenging working the DCF for ManU as they have negative cashflows from my calculations. What alternative valuation metrics would you suggest?

I already have the trading comps multiple (gave a good estimate), but I’m split between doing a DDM (since they pay dividends), or residual Income or even an LBO.  

Any suggestions please?

Your exploration into alternative valuation metrics, considering your specific situation, seems a promising path.

It's important to note that for entities like Manchester United, it's not uncommon to observe inconsistent or even negative cash flows due to the idiosyncrasies of their operations. These factors could indeed render traditional methods like DCF analysis less efficacious. From the investigations I've conducted, I've found no evidence of publicly-listed sports or football clubs consistently producing positive free cash flow. Given this, if one were to strictly rely on the DCF method, an investment in Manchester United may potentially be valued at zero. Put bluntly, be ready to shoulder the possibility of complete capital loss.

Though multiples derived from trading comparables can serve as useful benchmarks, they alone cannot offer a comprehensive picture of a team's valuation.

DDM could provide a feasible alternative, particularly since Manchester United issues dividends. However, the model's underlying assumptions - such as stable and predictable dividends - might not be applicable given the frequently volatile payout ratio of clubs like Manchester United, influenced by variables such as player transfers or infrastructural investments.

Instead, the Residual Income model might present a more suitable option. This approach is less swayed by cash flow volatility and effectively captures the value from abnormal earnings. However, you would still need to make certain assumptions about future earnings and profitability, which might be tricky given the nature of the industry.

In terms of the LBO model, unless you're envisioning a potential leveraged buyout or a private equity investment scenario, this technique might not be particularly relevant when valuing a publicly traded football club like Manchester United.

Considering the unique characteristics of the football industry, I would suggest exploring sports-specific valuation metrics, including multiples of earnings before interest, taxes, depreciation, and amortization (EBITDA) and revenue multiples. Furthermore, you might find value in assessing non-financial parameters such as club performance, fanbase size, and brand value.

Remember, utilising a mix of these methods can help cross-validate your results and offer a more comprehensive valuation perspective. I'm not certain if you caught it when I mentioned in the previous call, but football club investments tend to be more passion-driven, often attracting 'fans' rather than traditional investors seeking returns on their investments.

The key to a compelling report lies in succinctly explicating your valuation logic, much like the structure I've outlined in this message.

I hope this proves helpful and feel free to reach out if you require further insights or guidance!

Manos (talk) 18:30, 11 July 2023 (BST)

Research report example

Take a look at this commended research report on Tesla, Inc. from the Stockhub platform: https://stockhub.co/research/Tesla,_Inc. While it has garnered positive feedback, remember that it's simply a reference - there's no obligation to adhere to its style or content.

Key source(s) of information

A prime source of insightful information about this company is the company itself. Specifically, the annual report provides comprehensive details about its financial status and business progress. You can access this valuable resource at the following link: Manchester United's Annual Report. Another key source is that of the company's competitors.

Market analysis in the sport industry

I wanted to discuss a section of the research report focused on the market analysis for Manchester United. While working on it, I encountered some challenges in identifying the Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) for a football club.

In our team's catch-up meeting this morning, it was suggested that I specifically cover the football market size in general. Therefore, I would greatly appreciate it if you could provide any insights or guidance on this matter.

Thank you in advance for your assistance.

Addressing the complexities that arise when defining the Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) for a renowned football club like Manchester United certainly presents a challenging task.

Here is a structured approach you may consider:

1. Clarifying the Company's Mission: Begin by gaining a comprehensive understanding of the company's mission. Public sources may not always provide a lucid view, hence, you may find it beneficial to directly communicate with the company. This not only enriches your investment research report but also offers valuable insights to its readers. Be prepared for a potentially delayed response; in the interim, feel free to formulate an educated inference based on the information at your disposal.
2. Contextualizing the Company's Perception: My preliminary perusal of Manchester United's website indicates that the club perceives itself more as a sports entity rather than a singularly football-focused organization. Accordingly, I suggest you consider the TAM as the global sports market, the SAM as the global football market, and the SOM as the UK football market.

Please remember, these are merely suggestions and you should base your ultimate decision on what aligns best with your understanding and analysis. The crux of this exercise is to ensure a transparent communication of your methodology and rationale, benefiting all stakeholders involved in the reading process.

95.149.161.164 13:33, 5 July 2023 (BST)

Risks

• Currently, Manchester United are undergoing a takeover process. The club is currently owned by the Glazer family. There are two direct competitors, Sir Jim Ratcliffe and Sheikh Jassim of Qatar, and the Raine Group are overlooking the takeover. Ratcliffe is looking for only a majority stake whereas Sheikh Jassim wants 100% ownership. There's some ambiguity of how the club will be run, whether that be state owned of not.
• Currently, there's some unrest from the fanbase over the current ownership of the club, in which protests have been held, which could have affect on merchandise and ticket revenue.
• Match-day revenue will depend on the team performance, if the team is performing well, the. number of spectators will increase.
• Broadcast revenue is performance dependent, for example when the qualifies for major European competitions it will increase.

Hi, I've only just joined the Manchester United team last evening. I'm unaware of any other team discussion channels, if there are any could you please let me know. In the meantime I had a look at some of the risks associated with the company, any comments/improvements would be greatly appreciated. This isn't a complete list but just some current ideas.

Veer

Hi Veer,

Thank you for jumping in! I think there's a WhatsApp group chat you might be added to, now that you've put yourself out there.

That being said, having our discussions here, just like you've started, helps us connect with a bigger, global community. Anything related to this report is best discussed here. So, you're on the right track!

Again, thanks for getting involved.

95.149.161.164 17:13, 5 July 2023 (BST)