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Rogers’ sports assets are undervalued, Desjardins says

RCI.B stock

Things haven’t exactly gone great for investors in Rogers Communications (Rogers Communications Stock Quote, Chart, News, Analysts, Financials TSX:RCI.B) since its mammoth September acquisition, but that could soon change.

That’s the opinion of Desjardins Securities analyst Jerome Dubreuil, who in an October 17 research update to clients maintained his “Buy” rating on Rogers but cut his price target from $68.00 to $63.00.

As reported by the Globe and Mail today, the analyst explained the reasoning behind the move.

“Although we have reduced our target price, we still view increased reflection of sports assets in RCI’s share price as a potential catalyst,” he wrote.

The analyst argues that the market “continues to overlook the value of (Rogers) sports assets.”

“We believe RCI’s management could explore the option of adding the Toronto Blue Jays to the MLSE structure as a way to maximize the team’s value, generate efficiency gains and effectively monetize a portion of the baseball team to reduce leverage,” Dubreuil wrote. “If we include the Blue Jays in the mix, RCI’s four main sports teams would be worth $13.3-billon based on Forbes’ latest valuation at current exchange rates, or $15.4-billion using Forbes’ valuation for the Blue Jays and the value implied by the BCE transaction. However, given our view that RCI wants to remain a long-term owner of the Toronto sports franchises, we believe MLSE (including the Blue Jays) would likely trade at a significant discount to its PMV. A 30-per-cent discount to PMV would return a $9.3-billlion EV for a publicly traded MLSE if the Blue Jays were added to the structure.”

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