Manchester United are you a fan?

Manchester United (MANU) is the most famous sporting team in the world. According to the IPO documents MANU has 659 million followers worldwide with over 108m fans in China. Amazingly during the 2010/2011 season MANU 60 games attracted an average live cumulative audience of 49 million per game, based on Futures Data.

Not just a team

MANU is not only a team but a prestige brand. The advertisers seem to think so with record breaking deals with Chevrolet. The Jersey sponsorship with Chevrolet will bring in $559 million over seven years beginning in the 2014-2015 season. MANU has also increased its exposure to Asia by opening a marketing office in Hong Kong. This has lead to sponsorships with China Construction Bank for MANU branded credit cards and Wahaha their official soft drinks partner in China.

Are you a fan?

MANU had a rocky start to listed life completing its IPO at $14 down from the proposed range of $16-$20 given investors concerns over governance. The voting structure put in place by the Glazer family means the rest of the shareholders are subordinate to the families interests. However recent sponsorship deals including the purchase of 100% ownership of their content network has lead to re-rating. George Soros is officially a fan, his hedge fund bought into the stock after the IPO reporting a 7.85% stake in the company in a regulatory filing.

 What are the risks?

There are plenty if the team doesn't perform the value will go down, luckily MANU has a pretty consistent track record.

Unfortunately the man who should get most of the credit for MANU's trackrecord Sir Alex Ferguson is now aged 71. Sir Alex is the key, he was appointed manager in 1986 and according to public comments Sir Alex is 'hoping to stay on for a bit of time.' 27 years have passed so it is a big risk to the investment given players not only want to play with MANU but under Sir Alex as well.

Another risk are billionaires with way too much money investing in premier soccer teams without regard to financial returns. This is a big risk given football teams tend not to have salary caps. Hopefully for investors new fair play rules requiring teams to fund operations from cash flow and operate on the basis of their own revenue rather than debt will help mitigate some of this behaviour.

The customer base is concentrated. MANU's main customers are the Premier League, UEFA, Nike and Aon representing 51.5% of revenues in 2011. Though going forward this reliance will decline as more Asian based sponsors are brought on board.

Goal!!!
MANU's main opportunity is tapping into their overseas fanbase leveraging the smartphone. MANU now own 100% of their media network. MANU will increasingly offer video on demand providing subscribers with limited access to match highlights and news. In the UK coverage of MANU and the premier league is everywhere, in international markets there is less coverage and competition. MANU believe they can directly develop exclusive content to international fans in their language and local context. I think I will stay tuned.

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive has no position in MANU

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

I'll drink to that

It is still early but I think we might have already seen the deal of the year. No it’s not the ABI and Groupo Modelo takeover but a side deal between the two giants and Constellation brands (STZ) a wine company. The side deal involves STZ gaining ownership in the US of Corona. According to BrandZ below Corona is the 4th most valuable beer brand in the world. To appease concerns over market share concentration ABI has agreed to sell the US rights of the Corona brand to STZ. STZ will have the brand rights to Corona Extra, the best selling imported beer, Corona Light, the leading importing beer and Modelo Especial the third largest and one of the fastest growing major imported brands.
 

 

Concentrated beer

The US beer industry according to the DOJ complaint is highly concentrated with just two firms accounting for 65% of sales nationwide. With this deal STZ will become the 3rd largest beer company exposed to the fast growing Hispanic market in the US.

Source: DOJ, http://www.justice.gov/atr/cases/f292100/292100.pdf
 
A better balanced deal?

A Corona in both hands! The initial deal was not convincing and was blocked by regulators, this deal should ease their concerns. The initial deal involved STZ only having the right to import into the US for a 10 year period with ABI having an option to buy them out. STZ would not own the rights to the brand or production and would have been highly dependent on ABI. The DOJ believed that ABI's initial transaction to offload the remaining 50% of the Corona US import business was structured to "create a facade of competition" between ABI and STZ the importer.

The deal announced last night addressed all these concerns, now STZ will own the brands in the US and production facilities. STZ will become a stronger competitor over the longer term with perpetual ownership and ability to manufacture not just Coronas. STZ will be able to focus more on building volume and scale rather than just profit as a short term importer.

How do you know someone is planning for the future?

They buy two cases of Corona instead of one! The Piedras Negras brewery is key to the future of the deal. The brewery was completed in 2010 and utilizes state of the art technology which allows the brewery to be self-sufficient and able to be expanded in a modular fashion. The brewery is only 15km from the US border. According to STZ the brewery has capacity of around 120 million cases of beer which will cover 60% of STZ US import needs until they ramp up the plant further with ability to expand to approximately 360 million cases.

The beauty of the deal is that STZ has no restrictions on what beer they could produce at the facility, they can start producing their own craft beer. Importantly the deal helps to eliminate the uncertainty involved with the terminal value of the business with the ten year buyback eliminated. Out of nowhere STZ is now the 3rd largest beer company in the US with one of the world's newest production facilites. Will have to drink a few Coronas before I could imagine another deal that would beat this one.

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long STZ

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

 

Most popular apps

In the world of mobile applications Facebook and Google are vying for users attention. According to Comscore apps from these two companies accounted for 1 out of every 3 minutes spent on a mobile app. Recent Comscore data suggest Facebook app usage has pulled right ahead of Google in their race for mobile dominance.

 
The Facebook data is amazing considering they only became a 'mobile' first company this year. Though Facebook did benefit from Apple pulling Google maps from the app store (see chart below). Facebook is also the owner of Instagram, owning 2 of the most used apps. 

 

 

Source: http://www.comscore.com/Insights/Blog/Facebook_Vaults_Ahead_of_Google_Maps_to_Finish_2012_as_number_1_US_Mobile_App
 
History has shown that advertisers will go to where the audiences are, as mobile usage increases both Google and Facebook will benefit. While the smaller mobile screen is seen as a disadvantage for advertising this is more than offset by the ability of mobiles to detect location and proximity. We are now seeing early signs from Google taking advantage of a world in which we are constantly connected.

Google this week have announced changes to adwords their advertising auction system. Among the most interesting changes are the ability to target location and time of day. An example given by Google is a cafe. The cafe can now target higher bids for people searching for cafes close to their location and can adjust bids higher around certain times of day like lunch. This additional targeting capability will likely result in increases to Google's mobile revenues per ad which have struggled due to the small screen.

Jason
 

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long FB and GOOG

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

What Is a map worth?

Maps and geo location services are worth plenty according to a study commissioned by Google (GOOG). According to the study we could be saving up to $1.6 trillion dollars mainly due to more efficient uses of resources like transportation, time and search. The industry is growing rapidly at around 30% per annum. Depending on the situation benefits can be life saving or time saving.

 

As can be seen in the chart above there are numerous benefits, maps services are great for outdoors but I get lost indoors as well! Well luckily for me GOOG has uploaded floor plans for over 10,000 indoor locations to GOOG maps. It's not yet available in Australia but for users in Belgium, Canada, Denmark, France, Japan, the United Kingdom, the U.S., Sweden, and Switzerland they can finally find a bathroom in the shopping mall. It is a great idea by Google but is not available on Apples (AAPL) iPhone 5 and is only available to Android users. The eco-system war between GOOG Android and AAPL iOS system has definately stepped up. It is all about the apps and maps.

If you have a mansion unfortunately you cannot show off and upload it, GOOG allows uploads of only public buildings.

This video gives a pretty good overview of what to expect.

Geo location services are extremely valuable this will only increase with the addition of indoor plans. One priceless service is no more getting lost with your partner no upside down map reading here. For me that is plenty of value add there, though I'm sure with the introduction of indoor maps I'll end up spending more effecienty (which means more) at the local shopping mall.

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long GOOG

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Outfitt this

Urban Outfitters (URBN) is known for selling hip, funky fashion and household products. URBN has also been known to be somewhat controversial as the images below of Paddy's day specials suggests.
 
 

Source: Urban Outfitters

 

He's back
URBN has stumbled the past few years by missing key fashion trends in apparel. URBN has had to offer signficant discounts to sell their clothes impacting company margins. URBN moved so far off path that the 64 year old founder Richard Hayne (owner of nearly 19% in stock) has taken back the CEO role with a $1 salary, he also brought out the broom. In the past year the CEO, CFO and brand managers of URBN have been removed.
 
Omni-channel done right
Richard has brought back with him a vision that 50% of URBN sales will be from online within 5 years. A realistic target given that online was 30% of overall sales during the most recent holiday period. Staff are now able to access mobile and iPad points of sale so they can see all the inventory that's available to fulfil an order if it isn't in the store. Other initiatives include iPads replacing registers allowing for a more personal interaction between sales and customers. It also works well financially with a fully loaded iPad costing $1,000 versus a regsiter for $5,000.
 
URBN is a big believer in melding the benefits of a retail store with the benefits of the pure play online retailers. The main takeaway from the pure play online businesses in the chart below is that with online URBN can expand their product range.

Source: Urban Outfitters 

Selling through the web allows URBN to broaden their product range for extra sizes or colours that might not make sense with restricted space in a store. It can also sell products that are not profitable if sold in store. The product range can increase tremendously because instead of paying retail $40 a square foot URBN is paying warehouse rates of $4 a square foot. So they can justify more products and sell web exclusive products. URBN is also able to ship from stores not just distribution centres to fulfil internet orders. 
  
Back to growth
URBN wants to be a growth company but total comparable same store sales were a negative 1%. That's no growth. Digging deeper this number is impacted as internet orders can be returned to stores which are charged against store sales. Excluding these returns comparable sales would have been low single digit positive.

Even though URBN has been around since GAP and Limited Brands were founded it is still an American based brand with 90% of sales. There is the potential to roll out more stores in line with Richard's goal of getting back to 20% revenue growth. URBN has around 430 stores they believe they can grow to to 850 not including Asia. URBN has the luck of the Irish!
 
 
Jason 

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long URBN

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

Time to check in with OpenTable?

Making restaurant reservations is a pain. The phones are hardly ever answered and the best restaurants always seem to be full. The pain feels even worse when you are hungry! Luckily for you OpenTable (OPEN) will help quell those hunger pains. OPEN is North America's largest restaurant reservation booking service with 26,000 restaurants waiting to be booked.

Are you being served?
For a small technology company OPEN has great brand awareness. Unlike most e-commerce companies OPEN is not heavily reliant on third parties for traffic such as Google. 90-95% of users go direct to OPEN sites. Its mobile app and websites are the leading destinations for consumers to review, select, read menus and make a confirmed reservation.

Source: OpenTable

Everyone wins
One of the best aspects of the business is that OPEN receives the same amount per booking on mobile and desktop averaging 70 cents. No mobile monetisation issues here! Mobile is approximately 1/3 of bookings in North America. OPEN is a massive beneficiary of the trend to last minute location based bookings. 

The pay for performance booking model is favourable for restaurants as the average check brings in $42. A lot better result then traditional advertising where there is no guarantee of a booking.
OPEN tends to make around $600 per restaurant per month including a $200 subscription fee. OPEN software is compatible with the Ipad and a cloud based system is now available. This system called Connect has no subscription fee but reservations are higher at $2.50 a booking.

No stomach churn here
Some technology companies annoyingly tend not to disclose churn in their subscription base. OPEN is happy to disclose this number because churn rates are low, they tend to be around 1% a month. A decent rate considering a lot of restaurants unfortunately go out of business. 

OPEN has an interesting opportunity to be more involved in the field of data analytics. OPEN has a database of users dinning histories and preferences which can help restaurants to personalise the dining experience. This is a great opportunity as this data will help the OPEN system be more sticky and useful for the restaurants. There is also the possibility of a recommendation engine suggesting restaurants based on past data and in integration with Facebook where friends like to eat.

Source: OpenTable


OPEN is still only booking 12% of diners in North America. The highest booking rate at 31% is by the technology savvy area that is San Francisco. Penetration will most likely fall somewhere just under San Francisco's 31% so there is still ample room for domestic growth. There is also growth internationally with a major growth push underway in London. OPEN has 80% of the Michelin rated restaurants in London on board. They are also adjusting the service for locals so they can search by tube stop. 

Cake anyone?
OPEN is one of the best beneficiaries of the trend towards mobile usage. It is a service that is location based, sales are incremental as they are last minute and they monetize the same on mobile as desktop. Investors can have their cake and eat/book it too!

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long OPEN

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.

When was the last time you visited a branch?

If you are like everyone else probably quite a while.

The trend to online banking is reaching the tipping point. Consumers have adopted the habit of buying online and are now becoming more comfortable managing their money online. Enabling technology such as mobile has opened up the market for internet only banks by solving the problem of depositing cheques. With a mobile phone customers can take a picture of the cheque which is then remotely deposited into their online banking account. This technology now allows the internet banks to chase more corporate business.

Source: Everbank investor presentation

We believe the best way to play this growth trend is through BofI, the owner of Bank of Internet USA. 

BOFI is based in San Diego and its portfolio is concentrated in the region consisting mainly of single family housing. BOFI has total assets of $2.6 billion. The business outlook is strong with $180 million in pending applications.

No branches = Less fees

BOFI is a branchless bank, because it does not have the cost base of a regular bank BOFI is able to cut fees by an average of 30-35% . The lack of branches leads to a near 50% cost advantage. 

Source: BOFI investor presentation

Some of these benefits are passed onto the consumer through initiatives such as no overdraft fees. The average account age tends to be relatively sticky at 3-4 years. BOFI does not have its own ATM network but happily refunds any fees charged by other banks. Its ATM footprint ends up being the entire network!

How do they make loans?

Its always a good measure of a company to see who they are doing business with and here BOFI stands out. BOFI has an affiliation agreement with Costco for mortgages. Members of Costco can apply for a loan at great rates. Costco consumers trust the Costco brand to deliver value and with its cost structure BOFI is able to fit the bill.

Insiders own around 16% of the bank, we are banking alongside mangement that this trend to online banking will continue.

Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive is long BOFI

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.