Tip'd25 Aug 2010 11:42
At 10.5p, First Artist has a market cap of just £3.15 million – giving an Enterprise Value of £20.78 million. I view this as an inadequate valuation for the Media business alone – which is easily capable of generated £5 million+ of EBITDA as and when its market conditions even slightly improve. There is then also the Events business (which generated £339,000 of underlying EBITDA in the six months ended 28th February 2009) and Sport business (which “it is the Directors' intention to divest… as they believe it is not a natural fit with its media-focused strategy for the future”) in for nothing. Of course the debt situation creates a material risk, though the company looks to have bank support and notes it is “exploring numerous avenues to improve the position of the Group”. There is also of course the 10th August announced “talks which may or may not lead to an offer being made for the Group”. I know that talks continue (indeed Jon Smith is in New York today) and that there is now more than one party showing a real interest. I also know that if Smith cannot achieve well in excess of 20p per share he will walk and simply trade on and clear the debt over the longer term. I expect a lot to happen during the next month. In all, I continue to believe more shareholder value than currently on offer by selling the shares will be delivered from here and that thus, back at 10.5p I am upgrading my stance from “hold”to"buy".