MSG 2014 4th Quarter and Fiscal Review

MSG has delivered good Q4 results. Revenue is up 10% to $371 million vs Q4 2014, fueled by a strong playoff performance by the NY Rangers and a 62% increase in revenue for the Entertainment division. MSG Media was flat for the quarter and the year, primarily due to the Knicks absence from the NBA playoffs. Revenue for the year is up 16% and hits all-time for MSG. The results helped push MSG’s stock price to a 52-week high.

If you go down the income statement, it starts getting a little messy. Operating income needs to be adjusted for a few one-time expenses (NHL compliance buyout of Brad Richards, management change, delayed in one of their large scale theatrical show). One of the key metric, AOCF, stood at $55 million, down 40% compared to Q4 2013. However, excluding the NHL compliance buyout, AOCF would have been $84.6 million. Basically, higher operating expenses masked an increase in revenue.

The Rangers are expected to have another good season. If the Knicks can make the playoff that would push the stock further up (more advertising, ticket sales, merchandise etc…)

In a conference call with analysts, new CEO Tad Smith was reluctant to talk about details regarding the future use of free cash flow. Smith is really good at dodging questions but the one the one thing he made it clear that they want to own more content and to monetize it. It’s not a surprise, but I expect more acquisitions before dividends and share buybacks. I would prefer the latter.

Ted Smith on free cash flow:
“Since I joined the company we’ve been conducting a strategic evaluation to determine where we should focus our efforts to drive continued growth for shareholders….We believe in the importance of owning content. Our ownership of sports franchises, live entertainment productions, and original programming allows us to benefit from increases in asset value, gives us control over how to manage our brands, and creates flexibility to pursue new ways to monetize our content. In addition, we are exploring ways to extend how our customers can consume our content…”

It’s also good to note that Fiscal 2015 will be the first full year in a long time where there’s no renovation at the MSG arena and that the arena is open year-round for business.

With no debt, completed renovations, lower CAPEX the sale of Fuse, a booked Forum, a competitive NY Rangers team, the restructuration of the Knicks, it will be interesting what MSG do will all that free cash flow. MSG doesn’t issue guidance, but some analysts suggest MSG would generate between $200 million and $250 million in free cash flow in fiscal 2015.

MSG RESULTS - Q4 and Fiscal 2014

MSG RESULTS - Q4 and Fiscal 2014

Links & Sources
Q4 2014 Madison Square Garden Earnings Conference call
Conference Call Script
Q4 and FY2014 Results

Natural Grass-fed Butter in Canada

I’m shopping for grass-fed butter for two reasons.
1) The health benefits are excellent.
2) It definately tastes better.
3) And I want to make my own Bulletproof coffee.

If you are in Canada like me, shopping for natural grass-fed butter is a frustrating experience. Even the fancy hip health stores in urban centers like Montreal and Toronto doesn’t carry any. The main reason lies in our regulatory system and our seasons. Canada is subject to many strict dairy and agricultural laws, import restrictions, and we have a good winter. A snow diet is not considered grass-fed. Forget importing, Canada like other nations are very protective of their dairy industry. If there’s one thing the Bulletproof recipe has no wiggle room for, it’s the butter. It requires that you use organic unsalted grass-fed butter. Anything else other than grass-fed takes the “proof” out of bulletproof.

However, you can work your way around it. First two options are complicated and the third one is realizable.

1) Have a friend that goes to the U.S. and have brings back some. This option is not suitable for the majority of people. First, you need a friend. Second, you need a friend that goes to the U.S. Third, you need a friend that’s willing to bring butter back and that can be annoying. You might have 500 Facebook friends but where are they when you need real grass-fed butter?

2) Another hard way is to contact local dairy farms to see if they have any. Some farm produce some, but quantities can be hard to come by and it’s very seasonal. That option is one of of those hit or miss.

3) You can do what I do. Right now I’m using the L’Ancêtre butter based out of Quebec. In Canada, to have your butter qualify grass-fed, it needs to be 60% grass-fed. L’Ancêtre is at least 60% grass-fed and even more depending on the season. Now 60% is clearly not enough. However there’s a way around it. The key is to get your butter in the summer.Between May and October, cows are outside eating grass. You will notice that the butter is more yellow during that period and that’s a good sign. For the other part of the year, the winter part, the cows are fed a mix of grains depending on the farmer (and cost). That’s supposed to be other 40%. At least with L’Ancêtre, those grains are organic. My recommendation is to stock up the freezer with summer butter which is mostly grass fed. Butter freezes well and can be kept a long time.

Other notes: A lot of people swears by the popular brand name is Kerrygold. Kerrygold is classify organic and grass-fed. However Kerrygold is 90% grass-fed because Ireland has a winter too. By surfing the net, it seems that many are disappointed and feel cheated by the findings.

The Internet’s Original Sin

Ethan Zuckerman argues that it’s not too late to ditch the ad-based business model and build a better web. I hope he’s right. Most websites are ugly misleading pools of clickbait, traps, and even some of the most legit ones are covered in deception. Mr. Zuckerman was one of the guy behind some of the current ad-based model adopted by most websites (like pop-ups). His intentions were good, but it turned into an absolute mess.

Sure the majority of the content on the Net is free. The ad-based model is responsible for drowning me in information at my fingertip. However, in exchange for free content, we had to give up on quality which lead us to navigate a labyrinth of cyber landmines.

The latest trend of deception is to plug advertising as news. It look likes a real news article link, but instead it’s an advertising link that as the feel of real news. They are getting deceitful. Now bullshit radar has been upgraded and can detect 95% of the frauds. The other 5% are the new scams that keeps me on my toes.

I reposted my favorite section of the article below.

Reposted from The Atlantic
By Ethan Zuckerman

There are businesses, Cegłowski notes, that make money from advertising, like Yahoo and Gawker. But most businesses use advertising in a different way. Their revenue source is investor storytime:

Investor storytime is when someone pays you to tell them how rich they’ll get when you finally put ads on your site.

Pinterest is a site that runs on investor storytime. Most startups run on investor storytime.

Investor storytime is not exactly advertising, but it is related to advertising. Think of it as an advertising future, or perhaps the world’s most targeted ad.

Both business models involve persuasion. In one of them, you’re asking millions of listeners to hand over a little bit of money. In the other, you’re persuading one or two listeners to hand over millions of money.

The key part of investor storytime is persuading investors that your ads will be worth more than everyone else’s ads.

Full article: The Internet’s Original Sin by The Atlantic

Blackberry – Three Depressing Charts – A Reminder

In January 2007 Steve Jobs introduced the iPhone to the world. On June 29 2007, the first generation iPhone sales begins. That moment also signaled the beginning of the end for Blackberry (RIM at the time). At the time Blackberry was the king of mobile and was largely responsible making the smartphone mainstream. Its users were labeled “crackberries” because they couldn’t let the device go. Remember that flashing red light in the corner of your Blackberry phone sucking all your concentration? You couldn’t resist the impulse and you had to basically drop everything you were doing to check your Blackberry “notifications”. Back then having access to your emails on your phone was a huge thing. Well Steve Jobs changed the cool formula. Blackberry became “your parent’s smartphone” and the iPhone was the “thing”. Emails sucks and are annoying. Texting or microblogging/Twitting took over. And the Facebook notifications took over the flashing red light.

BlackBerry’s market cap, more than $80 billion at its peak, is now just $5 billion. Its peak stock price, ~$150 a share, is now trading at ~$10 a share, good enough for a solid 93% drop. Who could have predicted that the inability to play Angry Bird on your smartphone could wipe out $75 billion in value? (By the way you can play Angry Bird on your phone now, but it was a little late.)

The charts and table below are there to remind me us to never buy in the mania, especially in the tech world. Blackberry was controlling the smartphone market, and to its credit it was an excellent phone. The point is not whether or not Blackberry was a good company. The point is to make sure you understand the difference between value and price. Also be careful of bubbles because you can’t time when they will explode.

I never switched to an Android or Apple phone. I recently swapped my old beat up classic Blackberry Curve for a new Blackberry Q5. The keyboard is fantastic and the phone is a charm. My friends all have the cool hype phone. They love it at first but then they see me with by Q5 and are very curious by it. Some they didn’t Blackberry was still making phones, others are intrigue by the idea of going back to a Blackberry.

Disclosure: I never owned shares of Blackberry. I never short them either.

photo (2)
Image Source: Bloomberg

Blackberry market cap
Image Source: Forbes/Ycharts

Blackberry market share 2006
Image Source: Ping Mobile

MTY Food Group Leak?

MTY Food Group (MTY) has recently announced another acquisition with the addition of the franchise Café Dépôt, Sushi Man, Muffin Plus and Fabrika. This acquisition adds 102 stores to their current collection of stores. The acquisition is a small one but strategic since it strengthen MTY’s position on the food court. Except for your McDonalds’s of this world, there isn’t much that MTY doesn’t own at your local mall’s food court (Canada).

Below is a summary table:

The transaction is a welcoming one and comes from directly from Stanley Ma’s playbook. However something else has caught my attention and that is the spike in volume the day before the press release. Daily volume before the transaction clocked in at 160.9k shares, which is 6.5 times its daily average. MTY is considered a small cap sleepy stock. It might be a coincidence, but it smells like a leak. Unfortunately I don’t have data on who is the buyer or buyers are.

The chart below is a one-year chart of MTY’s price and volume history. You can see that daily volume over 100k is pretty rare and occurred five times in the last year.


Here’s is a table of the price and volume of MTY in the last thirty days.


Leaks are frequent before announcements. There are a lot of people involved in the numbers and it’s almost inevitable that some info gets leaked out. I have seen MTY trend downward days before a disappointed quarter and upward days before announcing a good quarter. All of this is speculation since I rely on observation instead of hard evidence. Q2 numbers are expected soon and MTY has been trending upward, is that an indication of good numbers to come?