Stronachs Trial Balloon

[Silver Charm]

Interesting article about how Stronach/Magna are planning on moving the Fla Derby to April. They will probably go head-to-head with the Wood, Blue Grass and Ark Derby and while these guys will act like it is on just an interim basis because of the reconstruction project, do not be surprised if they are reasonably successful that he trys to make this a permanent thing.  

Personally I think the field will resemble the Aventura but may get some interest because of the Graded Earnings. Things are watered down enough as it is and we do not need to have ANOTHER big three year race then. So why are they doing it. Probably because Stronach says I want that space for myself.

Good Luck. Also the whole upcoming meet sounds like a complete disaster. Frank be ready to hear your accountant utter the following words for ohh I don\'t know the fourth time in the last four years: \"We are going to have to take another write-down.\"

http://www.drf.com/news/article/58234.html



Post Edited (08-15-04 08:53)

[BitPlayer]

I don\'t get the impression from the article that Magna is pretending that the date shift is renovation-related.  The reason given is that they\'re trying to keep horses around longer.  They\'ve got a seasonal business, and they\'re trying to extend the season.

The date they\'re proposing sounds more like SA/Illinois Derby weekend than Blue Grass/Wood/Arkansas Derby weekend.

[Silver Charm]

The Ky and NY horsemen will not be sticking around. They will go back home and support their circuits and racing associations. What this means is the Fla Derby will look like the Aventura with cheaper types getting the Graded earnings and keep horses who run third in the Wood and Blue Grass out of the Derby. The schedule worked pretty good before so why change it??

What about the Fla Derby Day undercard which used to be pretty good?? You going to stay and run in the Swale or go home and run in the Bay Shore or the Lafayette. Used to be able to run in both. What happened to the Hutchinson is it now the Best Buy Mile, starting from aisle 7  ?? There was a lot of tradition there with horses such as Forty Niner, Unbridled\'s Song and Holy Bull using this as the springboard to start their campaigns.

Frank\'s been pushing all the right buttons since he started buying up tracks with at least three asset write-downs and MASSIVE MGMT TURNOVER so what do I know.

[Frank]

SC,

Frank arrived in Canada many years ago with little money, a work ethic and a trade.

He is now a billionaire industrialist. So as you say, what do you know?

Frank (not Stronach)

[Silver Charm]

Frank,

You make a very good point but like many other successful entreprenuers they seem to think that they have all the answers in all forms of business. Few do and most fail in the other ventures they embark on.

I study data and read Annual Reports for a living. Stronachs Racing Operation right now has been and is a SHORT if there ever was one.

[HP]

Silver,

I\'d have to disagree with your evaluation of Frank\'s Magna Entertainment. I was shocked that they have so little debt. Considering their assets are worth over $1 billion, their balance sheet looks pretty damn good to me. Their earnings are another story.

Considering the market cap, I can\'t see this as a slam dunk \"short.\" It\'s just not a wildly overpriced stock. Good luck. HP

[Frank]

SC,

I\'m pleased that you pointed out what you do for a living. Up to now, I assumed that you were JB\'s press agent.

I have no idea what info is contained in MEG\'s annual report. What I do know is that I am sickened by corrupt, arrogant administrations like NYRA that have run racing for many years. I welcome a new face, a businessman investing in the sport. I disagree with much of what he says and does but I\'m happy to give it a chance to play out.

Frank

[asfufh]

Also, MIM (a Stronach/Magna real estate company) is in the process of getting the approval to buyout MECA/Magna Entertainment with an offer currently valued a about $6.50 (Meca\'s stock price is about $6.00).
Asfufh

[Upper Nile]

The state of NY racing is the result of overregulation rather than a \"corrupt\" NYRA.  Look to The NY State Legislature and the State Racing and Wagering Board not NYRA.  If it was left to NYRA we\'d have an even lower takeout than what is already the lowest takeout in the country.  Dare I say we would also have rebates along with a lower takeout.  NYRA folks understand this business and have the best of interests for this great sport.  Politicians have a different agenda.

[OPM]

Personally, Magna has some good ideas about racings such as rebates to players.  However, their overall strategy is just plain dumb.  No one at the top management knows what the hell they are doing.  There are so many changes that it seems they have no continuity in their message.  It seems that they want racing to be part of an entertainment complex rather than the central attraction.  Also, this company will be bankrupt in 2 yrs unless their is a significant turnaround.  I don\'t see a significant turnaround in their portfolio anytime soon, especially with the problems that will arise at GP this winter.  They have not kept any promises made in Maryland.  Thistledown/ RP/Lone Star are D rated property at best.  They easily have the worst online betting site of all the major players.  Also, racing is not an industry that is growing leaps and bound.  If it was not for the rebaters, handle over the last couple of years would actually have gone down, not up.  Therefore, for them to gain market share they will have to get players away from other sites and this is not likely to happen.

[OPM]

I agree 100%.  CDSN also is great.

[Silver Charm]

HP,

Not real sure what Financials regarding Magna you looking at but here is a capsule review.

Cash---------$80,000,000
Real Estate-$870,000,000
Licenses----$235,000,000


Current Liab--$180,000,000
Long Term Debt$137,000,000
Convertibles--$219,000,000

This adds up to almost $540,000 million in debt and payables with only $80 Million in available cash.

The deficit is $112,000,000

The price of the stock peaked at 9.75 then crashed to 3.75 six months later.

The only assets he has are his Real Estate and if you remember when the bidding for Gulfstream was going on Churchill pulled out because they felt the offer Stronach made was way to high and made no sense. So what happens here recently, Stronach takes a $26 Million charge to write-down the value of his Gulfstream assets. He overpays then mismanages, not a good combination.

As OPM points out this has been a consistent pattern for Magna, a strategy that changes every six months, discarding of quality Mgmt people and a continued acquistion plan when they have yet to prove they can successfully operate the existing properties according to budgeted expectations.

From a racing standpoint moving the Fl. Derby is total lunacy. As it stands now he he had the full and undevoted attention of all the racing media and horse players when the Fl. Derby was a stand alone event. Now he wants to share that stage by moving the date.

Go figure.

[HP]

Silver,

To own a billion dollars in assets with only $137 million in long term debt is pretty good! Even if you look at it from the short-term side (the way you have it figured, where you are counting ALL his debt) - the asset/debt ratio is about 2:1.

As for \"write downs\", everybody does what they\'re allowed to do. I can\'t imagine too many analysts getting bent out of shape by a $26 million charge.

One way to look at Stronach\'s financial picture here is - if he dumped a few properties, he could pay most his debt and have a few tracks left over as \"profit.\"

It looks to me like increasing operating expenses are what\'s really eating away at his bottom line. Even without knowing about the offer referred to in this thread ($6.50 per share), I don\'t see this as a slam dunk short.

Now Donald Trump, there\'s a guy you can short without hesitation! I wonder what he will have to sell to stay afloat? Could be the end of the Trump era in ACity coming up. Good riddance. HP

[fasteddie]

Back to the original question; I view this as a temporary move. Stronach is bottom-line driven, and Fla. Derby Day is the BIGGEST handle day every year. The renovation makes it convenient to try this out. He will realize a 40% drop in handle (as well as field quality). Look for Turfway or some other prep to move into the march slot this year...could be lucrative!