Madison Square Garden Sports Is Trading At Less Than 60% Of Asset Value (NYSE:MSGS)

Thesis Snapshot

With a recent decline of over 10% in the last few trading days to $148 per share, Madison Square Garden Sports Corp. (MSGS) has fallen into Buy territory and we will begin accumulating shares at this level.

MSGS is a portfolio of sports assets, including the New York Knicks (NBA) and the New York Rangers (NHL).

According to Forbes, the Knicks are the most valuable NBA team, worth $4.6 billion in enterprise value. Similarly, the Rangers are the NHL’s most prized franchise with a value of $1.65 billion. In total, the two teams are worth $6.25 billion or $260 per share.

At Monday’s close, MSGS is valued at 57% of asset value, which appears to be an exciting entry point.

MSG Sports | Homepage

Company Background and Overview

In March of 2020, The Madison Square Garden Company (MSG) announced the approval to spin-off its entertainment businesses from its portfolio of sports assets. Upon completion of the transaction in April 2020, MSG became a pure-play sports company and changed its name to Madison Square Garden Sports Corp. The newly formed entertainment company was named Madison Square Garden Entertainment Corp. (MSGE).

MSGS is home to a collection of the most valuable franchises in professional sports, including the New York Knicks (NBA) and the New York Rangers (NHL).

Other MSGS assets include two development league teams – the Westchester Knicks, which serve as the exclusive G-League affiliate of the Knicks, and the Hartford Wolf Pack, the player development team for the Rangers playing in the American Hockey League (AHL).

In addition, the Company has an established presence in the emerging world of esports through Counter Logic Gaming (CLG), a North American esports organization, and Knicks Gaming, an NBA 2K League franchise.

Finally, MSGS operates two state-of-the-art performance centers. The Madison Square Garden Training Center in Greenburgh, NY is a 16-acre facility that offers the Knicks, Rangers, and Westchester Knicks a specialized training environment, with dedicated equipment for each team, the latest sports technology to optimize performance, and first-class amenities.

The CLG Performance Center in Los Angeles, CA includes unique competition spaces tailored to the Company’s esports game franchises, as well as a studio and editing bay for video productions and outdoor areas that can be used to hold fan events.


Given the challenging COVID impact on entertainment-based companies like MSGS, recent operating results are poor. However, in our view, the near-term headwinds do not impact the long-term value of the Knicks and Rangers.

Further, MSGS maintains plenty of liquidity to ride out the current storm. The company has $293 million in available liquidity, including $78 million in cash and $215 million in undrawn credit facilities.

MSGS provides an opportunity to own two of the most valuable trophy assets in the world. Forbes values the Knicks and Rangers at $6.25 billion or $260 per share.

As it relates to the appraisals of professional sports teams, Forbes’ estimates carry credibility. Last week, the owner of the New York Mets agreed to sell the team for $2.42 billion, within 1% of the $2.4 billion valuation Forbes placed on the franchise.

As mentioned above, MSGS is a portfolio of assets. Although the Knicks and Rangers drive a significant portion of the value, the balance of the holdings are not worthless. In fact, they are quite interesting.

To simplify our analysis, we assume that the development teams, the esports initiatives, and the performance centers are cumulatively equal to the company’s net debt ($272 million).

Using a sum-of-the-parts analysis, we estimate MSGS’s fair value at $260 per share. Using Monday’s close, MSGS shares trade at 57% of asset value.


Professional sports teams are rare and valuable. MSGS owns the best of breed franchises in the NBA and NHL. Trading at a fraction of asset value, the company is being harshly penalized for poor near-term (COVID-related) operating performance.

We view this situation as an opportunity to take advantage of the Street’s short-sighted nature. MSGS is a compelling opportunity for patient, value-centric investors.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in MSGS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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