dc.description.abstract | The purpose of this thesis is to estimate the equity value, thereby estimating value per share of
Manchester United Plc, henceforth referred to as Manchester United or United. Valuation date
is June 30th, 2019, and by comparing with market share price the same day, an investment
recommendation is issued.
The framework for this thesis is based on Palepu, Healy and Peek’s textbook Business
analysis and valuation. A presentation of Manchester United and the football industry is
followed by a strategic and financial statement analysis, serving as basis for a prospective
analysis including forecast and valuation.
A look into Manchester United and the football industry uncovers a growing multi-billion
industry driven by increasing broadcasting revenues. The strategic analysis reveals industry
profitability faces threats from increasing player wages and illegal streaming. With brand
awareness and organizational structuring, United maintain a competitive advantage through
capitalizing on a strong brand. Investment in scouting network and homegrown players, is
expected to positively affect future earnings and cashflows. Homegrown players,
controversially carry book value of zero, reducing amortization and employee benefits
compared to buying established star players.
The financial statement analysis discloses Manchester United as a well driven business
compared to their peers. In spite of mediocre sporting results, the club has maintained a
profitable level. Forecasted financial statements are influenced by diminishing broadcasting
revenue growth and an increasing NOPAT margin due to reduction of amortizations and
player wages.
In direct valuation methods based on the dividend discount model, expected future earnings
and cashflows are discounted at estimated cost of equity. Equity value is calculated at 2221
million GBP, translated into an estimated value per share of 17.19 USD. Comparing with
market share value of 18.25 USD concludes Manchester United’s equity is fairly priced,
hence a “hold” recommendation is issued. | en_US |