The Good News Keeps On Coming For Manchester United

Barclays Premier League champions Manchester United MANU have scored big lately as the future looks very bright for the financial performance of the soccer club as well as the on-field results. However, more good news could be in for shareholders as the club may see a positive revision to asset values in the coming months, which would boost shareholder value further.

Strong Catalysts

Several catalysts appear to be forming for the club, aside from the on-filed performances. First of all, a new television rights deal should see television revenue for matches soar next year from this year's $93.25 million to over $150 million next year if performances remain strong on the pitch.

Also, the club is set to renegotiate its merchandising contract with Nike NKE by the end of July. A new deal could see merchandising revenue almost double in coming years following a record-breaking deal from a rival club.

Tuesday, the CIES Football Observatory's Annual Review revealed that the club's balance sheet could see upside revisions as well. Increasing asset values would be a bonus to shareholders as the book value of equity would increase, assuming liabilities are unaffected by any increase.

Transfer Values

As of June 2012, the last annual report, Manchester United reported a book value on its players of about $173 million. However, after this report, the club signed Dutch playmaker and goal-scorer Robin Van Persie, who went on to lead the league in goals. Manchester United paid just over $37 million for his services on a four-year contract.

Thus, using straight line amortization, his book value now would be about $27.76 million. However, the analysts at CIES using data powered by Opta, estimate his market value to be about $65.7 million, or more than 130 percent more than the book value than the club would be carrying the player at.

A similar story can be seen in the acquisition of Japanese midfielder Shinji Kagawa also made last summer. United brought him for just over $26.2 million however CIES estimates his value to be closer to $44 million based on Opta data. Thus, his book value (using one year of amortization of the four year useful life of the contract) is a mere 124 percent below his estimated market value.

Should the club revise the book values of these assets higher or look to sell some assets, shareholders could be set for a windfall. The benefits would flow from the balance sheet to the income statement and be booked as gains on sales, boosting net income and driving value for shareholders.

Analysts See Upside

Analysts surveyed by Bloomberg see upside to the stock from here. The consensus rating of the nine analysts who cover the stock on Bloomberg is a buy with six having buy ratings on the stock and three rating the stock hold. The average price target for the stock is $19.92, which would represent about 23.25 percent upside from the current stock price.

Jefferies has the most bullish price target on the street at $23 and this is notable because they are the most recent coverage team to update estimates on the company, meaning that there could be room for other analysts to raise estimates and targets in the coming weeks. Jefferies' $23 price target implies a whopping 42.3 percent upside to the stock's current price of $16.16.