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No. of Recommendations: 13
My 2nd largest position, and I have been buying more today. CRWN owns the Hallmark TV channel targeting women with family/wholesome programming. They have recently introduced more original programming, which has clearly struck a chord with their target audience. The result is higher ratings and strong advertising pricing/growth, which is bucking the trend of general cable channels.

So latest Q, they grew revenue double digit and EBITDA by 25%. EPS doubled YoY and grew 30%+ for the year. Stock trades at 13x trailing EPS (non-taxed as they have sizable NOL which will shield tax for a long time). Debt level is steadily coming down.

Mgmt noted momentum is continuing with 2015 off to a "strong start".

There are a couple of interesting kickers. The company is 90% owned by Hallmark family, and there is a lot of speculation/frustration among minority shareholders on what the control shareholders would do. Almost two years ago, the family filed a 13D indicating they are possibly looking for alternatives, which I surmise can only be either taking out the minority shareholders or selling out to a strategic.

Fast forward 2 years. The revenue/intrinsic value has been steadily growing, yet the stock is still languishing at pretty low multiple. No sell-side coverage given the limited float.

It is obvious the company could be worth a lot more in a sale to strategic -- tons of G&A can be cut, and they could get much higher subscription fee as part of a conglomerate vs. a tiny stand-alone company. By some measure, they get less than half of what comparable channels are getting despite stronger ratings. It is a bit surprising to me that we haven't seen more consolidation in the content space given whats going on in distribution space. Most big players seem content to be buying back their own stock, for now.

And they have some high interest debt rolling off fairly soon which will only boost earnings and FCF.

I think the company is worth $4+ in its current form, and easily $5+ in a take-out scenario.
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