New York Rangers Valued At $2B: What It Could Mean For MSGS Stock And A Sum Of Parts Discount

For the first time ever, a National Hockey League is valued at $2 billion in the annual valuation rankings from Forbes. Here’s what the valuation estimate and recent acquisition activity in the space could mean for the owner of the Rangers, which is publicly traded.

What Happened: The average National Hockey League team saw a 32% rise in its value assigned in the annual Forbes rankings. The average NHL team is worth $865 million in the new rankings.

This marked the biggest one-year average gain to the average NHL valuation by Forbes since a 50% gain in 2012 when a new Canadian market television deal was signed.

Leading the NHL team rankings is the New York Rangers, valued at $2 billion. The valuation of the Rangers was up 21% from the previous year and marked the first time a team was valued at $2 billion.

Credited with the increase in valuation changes were several recent team sales and a rise in league revenue.

The Pittsburgh Penguins recently entered a deal with Fenway Sports Group for a $900 million purchase price, or around 4.5 times expected revenue for the current 2021-'22 season. Prior to the deal, the average multiple was around four times revenue, according to Forbes.

Deals for the Carolina Hurricanes (2018), New York Islanders (2016), and Arizona Coyotes (2014, 2019) were done at multiples of 3.9, 4.2, 3.3 and 3.0, respectively.

League revenue is increasing thanks to media deals. ESPN, owned by Walt Disney Co DIS and Turner, owned by AT&T Inc T signed new deals that started this season paying the NHL an average of $625 million a year. The previous U.S. media deals from ESPN and Comcast Corporation CMCSA unit NBC paid an average of $300 million annually.

The league reported hockey-related revenue of $2.9 billion in the 2020-'21 season. Revenue is expected to be $4.8 billion in 2021-'22 and increase to $6 billion for the 2025-'26 season.

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Madison Square Garden Sports: The Rangers are owned by Madison Square Garden Sports Corp MSGS, a publicly-traded sports holding company. Madison Square Garden Sports owns the Rangers, the New York Knicks (NBA), Westchester Knicks (NBA G League), Hartford Wolf Pack (AHL) and esports assets such as Counter Logic Gaming and Knicks Gaming, which is in the 2K League owned by the NBA and Take-Two Interactive Software TTWO.

The latest rankings from Forbes break the Rangers down at $468 million for sport, $893 million for the market, $309 million for the stadium and $330 million for the brand. The team’s iconic Madison Square Garden Arena is owned by Madison Square Garden Entertainment Corp MSGE.

The Knicks were valued at $5.8 billion in the latest Forbes rankings, up 16% from the previous year. The valuation is broken down as $2.0 billion for sport, $2.5 billion for market, $403 million for the stadium and $918 million for the brand.

Taking out the value of Madison Square Garden Arena and the Rangers are valued at $1.7 billion. The Knicks would be valued at $5.4 billion without the stadium. There could be some additional overlap between the values of the teams being owned together.

Ultimately, the two iconic New York teams are valued at $7.1 billion without their stadium.

MSGS shares trade with a market capitalization of $4.2 billion and an enterprise value of $5.3 billion. Based on valuation, MSGS shares could be selling at a huge discount to its actual value of assets.

Several other sports teams are up for potential sale, which could increase multiples in several sports. The increase in media deals going forward should also provide a nice boost to revenue for both the Knicks and Rangers.

MSGS Price Action: MSGS shares are down 1.82% to $170.12 Thursday afternoon at publication. Shares have traded between $152.42 and $207.09 over the last 52 weeks.

Image by soerli from Pixabay