Generals' Watchlist: Saga Communication (SGA) A Local Media Gem
Initial Unveiling of a Potential Undervalued Broadcasting Gem in Local Media
Investment Considerations
Saga Communications is a well-established company with a strong track record of financial performance. SGA 0.00%↑'s recent acquisition of Neuhoff Communications, Inc radio stations, should boost revenue and earnings for this upcoming year-end earnings release. The company launch of digital news services is also a positive development, as it will allow the company to reach a wider audience. SGA 0.00%↑ has been actively investing in digital initiatives, including streaming services and mobile applications, to expand its reach and cater to changing consumer preferences. This is a thinly traded small cap for personal accounts and small hedge funds.
Recent Major News
Saga Communications is rapidly expanding its local online news websites, with 18 planned by the end of Q2, due to strong pre-bookings. The company is also seeing growth in digital revenue, with a projected 11% of total revenue in 2024, and strong growth in e-commerce sales. Saga is actively pursuing potential acquisitions and remains a "buyer, not a seller."
Background
Saga Communications is a media and entertainment broadcasting company that owns and operates radio stations in the United States. The company was founded in 1986 and is headquartered in Cedar Rapids, Iowa. Saga currently has 255 radio stations in 30 states. As of February 29, 2024, we owned seventy-nine FM, thirty-three AM radio stations and eighty metro signals serving twenty-seven markets.
SGA’s primary business involves M&A, developing, and operating broadcast properties. SGA broadcast their radio stations on various formats like news, talk radio, adult contemporary, country, classic rock, and oldies. The company also operates radio station websites and other related digital services.
Financial Performance
Saga's financial performance has remained consistent over the years, with a focus on local market dominance, operational efficiency, and strategic growth initiatives.
Revenue: For the year ended December 31, 2023, Saga Communications reported revenue of $112.77 million, a 3.3% decrease compared to the previous year. Despite the decrease in revenue, the company has maintained a consistent level of profitability.
Net income: For the nine months ended December 31, 2023, the company reported a net income of $9.5 million, a 3.24% increase from 2022 year end of $9.2 million.
Outlook: Saga Communications is expected to continue its focus on local market dominance, operational efficiency, and strategic growth initiatives in the next three years. The company's experienced management team, commitment to these principles, and strong financial performance position it for continued success
Debt Level
Saga Communications no debt and pays interest on unused revolving credit facility. Aside from interest bearing debt I like to understand what financial obligations SGA has outside of interest bearing debt and the below is captured:
Top Institutional Owners
Towerview LLC (18.54% ownership)
Gate City Capital Management LLC (7.31% ownership)
Dimensional Fund Advisors LP (5.53% ownership)
These institutional investors are the top shareholders of Saga Communications,
https://www.nasdaq.com/market-activity/stocks/sga/institutional-holdings
Given Saga's impressive track record of expanding its media portfolio over two decades and its current low market valuation, the stock merits close monitoring. The company's robust fundamentals, consistent cash flow generation, and undervalued potential relative to its intrinsic value make it an attractive investment opportunity. Additionally, Saga's ongoing digital expansion and strategic acquisition strategy position it well for long-term growth and potential further appreciation.