Equity valuation Manchester United PLC

Abstract

The purpose of this thesis is to issue a buy or sell recommendation for Manchester United’s shares, as of 30th June 2016. To do so, different valuation methodologies may be applied. The author decided to use Discounted Cash Flows and Multiples. The first, due to its flexibility to build different scenarios (in a case of a football club linked to sports performance) and because Manchester United is expected to sustain its D/E ratio. The second was useful to triangulate results. Through DCF, and based on the weighted average of 3 scenarios, the author reached a target price of 13.5£ per share, meaning the firm is undervalued (Market Quote = 11.9£), and yielding a buy recommendation. With the Multiples approach, the target price attained amounted to 12.1£, lower than with the first method. However, in the case of football clubs, a Multiples valuation is hard to perform due to the low number of public companies and the structural differences among countries. The average EV/ EBITDA multiple of 12x presents an incredibly high standard deviation. Hence, the author sustained the target price of 13.5£ per share. The author also compared its valuation results with an Equity Research performed by J. P. Morgan. Using the same methodologies, their report also concluded that Manchester United’s shares are undervalued, with a target price of 14.5£. However, and unlike the author, their price was achieved by averaging 50%/50% the valuation results of the Multiples and the DCF approaches.

Date of Award	21 Feb 2017
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Carlos Tudela Martins (Supervisor)