Dover Motorsports (DVD): Two Racetracks on 1,770 Acres and 65% of the TV Rights to 2 NASCAR Cup Series Races a Year for Just $60 million
I mentioned this stock on a recent podcast. This is more of an initial interest post than usual. It’s likely I’ll follow this post up with one that goes into more detail. Two things I don’t analyze in this write-up are: 1) What this company will look like now that it is once again hosting races at Nashville (in 2021) and cutting back races at Dover. 2) What the normal level of free cash flow is here. I discuss EBITDA. But, I think normalized free cash flow is the far better measure. And I don’t discuss that at all here. Finally, I haven’t dug deeply into NASCAR as a sport to get enough of a feel for whether it is durable and likely to increase or decrease in popularity in the years ahead. This is critical to analyzing the investment. And it’s the next logical step. But, this write-up was already getting long. So, better to do a deeper follow-up later and stay at the more superficial level for this first analysis.
Dover Motorsports is a $60 million market cap New York Stock Exchange listed company. It has two classes of stock. The super voting shares are owned by Henry B. Tippie (the now over 90-year old chairman). That leaves about $30 million worth of float in the common stock. Enterprise value is similar to – maybe a bit lower than – the $60 million market cap. As of March 31st, 2020 – the company had $5 million in cash on hand. Liabilities are generally stuff like deferred revenue (cash received that’ll be earned when a race is hosted later this year). The one exception is a bond issue I’ll discuss in a minute. The balance sheet shows about $4 million in liability related to that bond issue. The reality is that there could be another $10 million owed on those bonds. Or – as seems more likely now – the company could invest in some cap-ex instead and even that $4 million liability might go away. Why is that?
The liability is tied to bonds issued by the Sports Authority of Wilson County, TN. These bonds were issued as part of the funding of the Nashville Superspeedway. It’s a racetrack about a 40-minute drive from Nashville that was built by Dover Motorsports 20 years ago. The racetrack is big. It was originally on 1,400 acres of owned land, now down to 1,000 acres of land that hasn’t been sold off. It’s also – if you look at a list of where NASCAR and non-NASCAR races are held – much more in line with NASCAR type tracks in terms of the construction of the track (concrete), its length (1.33 miles), and the amount of seating. However, the track had never held a NASCAR Cup Series (think of this as the “major leagues” of U.S. auto racing) race. Without hosting such a race, it never made money. And, in fact, it hasn’t been operated in any way for close …
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