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Bull of the Day: Manchester United PLC (MANU)

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In the United States, sports broadcasting is dominated by the “Big 4” – NFL football, MLB baseball, NBA basketball and NHL hockey. Head to your neighborhood sports bar and you’re likely to find fans enjoying hot wings and beer while one or more of those sports is displayed on multiple TVs. If it happens to be Saturday or Sunday afternoon, you might also find a professional golf tournament on a screen or two.

In the rest of the world, it’s a somewhat different story. In Europe, Mexico and South America especially, the professional sport most fans are most interested in is Soccer – commonly referred to simply as “football” outside the US.

International soccer enthusiasts are rabid for their favorite teams, anxiously watching every pass, shot and save with a level of enthusiasm that’s every bit the equal of American NFL fans. To a greater degree than is typical with the big 4 American sports, individual players often exhibit larger-than-life personalities on and off the field and soccer fans often have not only favorite players to root for, but also foils on other teams that they love to root against. It’s a winning formula for retaining fan interest and support.

Among international soccer clubs, there is perhaps no more recognizable name than England’s Manchester United which has 659 million global followers and has been in existence for 140 years. “Man U” or “United” – as hardcore fans refer to it - is both the highest-earning and most valuable soccer club in the world with revenues for the 2016-2017 season of €676 million and a total value of over €3 billion.

It’s also a publicly traded company since its 2012 listing on the New York Stock Exchange.

Just like the most popular US professional sports franchises, MANU enjoys a diverse stream of revenues that includes not only ticket sales and broadcast rights, but also licensed merchandise, concessions and strategic partnerships with companies outside the sports world.

In fact, MANU - which breaks down revenues for investors into three categories, Commercial, Broadcasting and Matchday – takes in more from the Commercial segment, which includes sponsorships as well as licensed merchandise and apparel, than from the other two segments combined.  In the most recent quarter, Commercial accounted for £76B in revenue, Broadcasting was £43B and Matchday was £16B.

Positive earnings estimate revisions earn MANU a Zacks Rank #1 (Strong Buy).

Company guidance for fiscal year 2019 predicts revenues of £615-630B and EBITDA of £175-190M. The report also highlighted new partnerships with Kohler and True Religion apparel as well as the renewal of sponsorships from Canon Medical Systems and Deezer.

Though MANU shares have recently come off of their 52-week highs, they still trade at a forward P/E Ratio of 108X, so this is definitely not a Value investment, but with a strong brand with international recognition and consistently growing earnings – as well as a 1% dividend yield – it represents an interesting way to diversify a portfolio internationally.

Plus, how often does an average person get the opportunity to become part owner of a professional sports team?

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