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Baseball agent and sports marketing play looks cheap after shunning a takeover
Thursday 03 Nov 2016 Author: Tom Sieber

Sports marketing and baseball player agent TLA Worldwide (TLA:AIM) looks attractively valued after an abortive 65p bid for the company from Atlantic Alliance Partnership (AAPC:NDQ).

TLA pulled its recommendation for AAPC’s bid in September. It believed investor demand wouldn’t be as strong for the suitor’s shares as previously expected, so there wouldn’t be much point accepting a takeover.

TLA - Comparison Line Chart (Rebased to first)

That shifts the focus back on TLA’s own capability to deliver knock-out returns for shareholders. We think it looks match fit as an investment.

The shares look cheap trading on 7.5 times earnings forecasts for 2017. Investors should also enjoy a nice dividend, yielding 3.2%. We believe there’s a good chance the payout will grow fast.

On commission

TLA raised £12 million when it floated on AIM at 20p in December 2011. It has since expanded by acquiring Peter E Greenberg, a baseball representation business with a particular niche in representing Spanish-speaking clients.

In May 2015 it paid $19.5m for Elite Sports Properties, a leading athlete and event management company in the UK and Australia.

The baseball representation business has attractive fundamentals thanks to the enduring appeal of Major League Baseball (MLB) in the US and the long-term guaranteed income from commission on players’ contracts.

The company invested in this area by hiring new senior agents in 2016, increasing its roster of MLB clients by 19% in the first half of 2016. This expenditure will constrain profitability in the 2016 but, in turn, should provide a material boost in 2017.

Profit from baseball representation was down year-on-year in the first half of the year but this reflected the timing of signing bonuses. Normally signed in the second half at the end of the regular playing season, TLA unusually signed one in the first six months of 2015, resulting in tough comparatives.

great ideas pie

Big events

The sports marketing side doubled its number of events to six in 2016 with the latest and last of these coming in November. The New Zealand rugby union team or All Blacks will line up against an Irish side which should enjoy plenty of local interest and support in Chicago.

The division, which also represents athletes from sports outside of baseball, saw a 24% increase in operating income to $10.5m in the first six months of 2016.

The working capital required to put on sporting events has seen an increase in net debt to $25.8m and the balance sheet seems the main risk to weigh for investors. (TS)

TLA Worldwide (TLA:AIM) 39p

Stop loss: 31.2p

Market value: £56m

Prospective PE Dec 2016: 8.3

Prospective PE Dec 2017: 7.5

Dividend yield: 3.2%

Analyst price target: 63p (Numis)

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