Analyzing Sinclair Broadcast (Real Estate & Signs) Group


Sinclair Broadcast Group has been on an acquisition binge lately, paying 9.1 million bucks for a commercial warehouse in Baltimore, 17.1 million for a commercial office building in Baltimore, 5.2 million for developmental land in Chapel Hill, NC, and 3.7 million for developmental land in Annapolis, MD. Before that, it bought Triangle Sign & Service, a commercial sign company based in Baltimore, for 16 million. That has some Wall Street analysts concerned. In the company’s quarterly conference call, Bear Stearns analyst Victor Miller asked why Sinclair has been focusing so much on non-television businesses? CFO David Amy noted that Sinclair had been doing more than just TV for 7-8 years now. And yes, the company has been bidding on potential duopoly properties, but has been outbid, so it is investing where it sees profitable opportunities.

CEO David Smith noted that Sinclair has four options for creating value for shareholders: investing in TV; investing elsewhere; paying dividends; and buying back stock. In fact, Sinclair yesterday announced that it is increasing its annual dividend by 10 cents per share to 70 cents. CFO Amy noted that was a 5.75% yield on the previous day’s closing price of 12.09, one of the highest yields in broadcasting.

TVBR/RBR observation: The proof is in the pudding – so let’s check out that pudding. In Q3, the "other operating divisions’ revenues" at Sinclair showed 12.5 million, up dramatically from 3.3 million a year ago. Of course, operating expenses for those businesses also shot up. Simple math, subtracting expenses from revenues, shows "other" with a positive 1.3 million in Q3 this year, vs. a negative 22K a year ago. Not bad pudding.