EW Scripps (SSP) - Beneficiary of 2018 Expected Political Ad Spend - Barry Lucas 4-10-2018

EW Scripps (SSP) - Beneficiary of 2018 Expected Political Ad Spend - Barry Lucas 4-10-2018

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Transcript:Florida Governor Rick Scott’s announcement that he will seek Bill Nelson’s senate seat will probably make the contest among the most expensive ever. Much of the money will flow to local TV because television remains an effective way to get out the vote.
Hi, I’m Barry Lucas a member of Gabelli & Company’s digital media team.
The Cook Political Report put total TV ad spending in 2014 at $2.8 billion, and we think political spending this year will exceed that level.
The entire broadcast group should benefit from the country’s political contentiousness, but note that EW Scripps has three markets in Florida. In total, 12 US senate races and 16 gubernatorial contests will be held in SSP markets.
Scripps has 82 million shares outstanding and a $950 million equity cap. With $545 million of net debt and about $75 million of assets held for sale, SSP’s total enterprise value is $1.4 billion.
Scripps captured $75 million of political advertising in 2014, and if races remain close, then the company should surpass that total.
In addition to political, the company has more than 2 million subscribers for which it is not getting retransmission consent fees coming on the rate card in 2020 that should add more than $50 million of EBITDA. Scripps also announced a $30 million cost-reduction program, reinstated its quarterly dividend and plans to divest its 34 radio stations.
We calculate a $23 per share private market value at 8x broadcast cash flow over the 2019-2020 political cycle and recommend purchase of the stock.



Source: Gabelli TV (via YouTube)
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