Sector financial performance:

This company, which primarily owns professional soccer sport team - Manchester

United earning revenue from commercial –sponsorship &retail, broadcasting, and ticket of matches, has been grouped into sport team –soccer sector in admission to amusement industry.

It seems that the demand for soccer sports entertainment has been continuously strong in the past three years as indicated by increased revenue of media rights of sport leagues (TV broadcasting). However, data indicates that the growth in revenue from sponsorship/AD and ticket seems to be slowing down, a possible signal of consumers’ demand slowing down.

While the increased revenue/demand, the gross margins of companies seem to pull back from high 2016 (a typical gross margin of 13% in 2018) as growth in revenue of commercial and ticker slowed down and increased expenses.  A typical SG&A as percentage of sales is about 3% and operating margin is about 10% in 2018.

The typical enterprise price/EBI ratio is about 75, which implies a stock price/sales ratio of 4.

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Company performance:

It seems that the revenue of broadcasting of this company has been increasing fast in the past several years (23-38% annually) due to new agreement of TV broadcasting rights and more broadcasting of matches. Revenue from sponsorship, retail, and admission tickets has increased as well during the same period but present a slowing down pace.

The first nine months of fiscal 2018 compared with the same period of 2017

Net revenue increased 9.2% due to increase of 2.4% in commercial revenue, of 23.4% in broadcast, and of 6.7% in ticket.

Fiscal 2017 compared with fiscal 2016

Net revenue increased 12.8% due to increase of 2.7% in commercial revenue, of 38.2% in broadcast, and of 4.7% in ticket.

Fiscal 2016 compared with fiscal 2015

Net revenue increased 30.4% due to increase of 36.3% in commercial revenue, of 30.4% in broadcast, and of 17.7% in ticket.

Its gross margin (including direct operating costs and depreciation) and SG&A as percentage of sales have been fluctuated between 12-20% and between 3-10% respectively since 2015 as revenue fluctuated. And this resulted in operating margins fluctuating between 2-15%.

Stock performance

This company is having price/cash flow ratio of 96 and price/sales of 5. We think that its stock is being relatively undervalued compared with its peer-The Madison Square Garden Company.