Wednesday, October 14, 2009

Why James is still on a roll, by Terry McCrann - 14th October 2009

There is one simple all-encompassing measure of James Packer's performance since he assumed absolute responsibility for - he already had control of - the family fortune, when 'Big Kerry' died on Boxing Day just under four years ago.

It is also the single most important measure: How have he and his fellow shareholders done?

When the market closed for Christmas back then, the share price of the Packers' then PBL company was $16.61.

Somewhat over-excited observers suggested it would reopen post-Christmas and post-Kerry as much as 10 per cent lower. In the event it dropped 20.

Well those shareholders now have a package of value adding to around $17.80 per old PBL share. They are $1.20 a share better off under James Packer's sole stewardship.

It's simple, it's clear, it's undeniable. It captures all the pluses and minuses and finishes with a significant net plus.

First up James split PBL into two companies - Crown, to hold the gaming interests and Consolidated Media for the 'old' Packer business. Investors were given one share in each of the new companies for each PBL share plus a special $3 dividend.

So today's value package comprises the $9.19 market price for a Crown share, $3.08 for a ConsMedia share, $3 for the demerger dividend, $2.13 in accumulated normal dividends since then and 38 for theoretical interest earned on those dividends.

Now in isolation an extra $1.20 over four years mightn't sound much. But it came through a little event called the Global Financial Crisis.

In that context, what's called the 'Total Shareholder Return' or TSR delivered to investors in the Packer empire of plus 5.8 per cent per year over the four years is very impressive. Just about everybody else outside the resources sector would be negative.

Compared to its peers, the performance of the - to stress, James - Packer empire is spectacular. And it is very important to note, that it has two sets of peers - the gaming sector and the media sector.

Why important? Because it is the combination and the type of media which is key to understanding James' success to date and the plays he is making into the 21st century. In both spaces.

It is also fundamentally his corporate empire. It reflects his choices and his strategic and tactical decisions. The biggest of course, the exactly perfectly timed sale of the Nine Network just 10 months after Kerry's death.

Investment bank UBS has done the numbers. They show a media average (of Seven, Ten, Fairfax, WAN and NewsCorp) TSR of minus 19.5 per cent a year since Kerry's death.

While the gaming average (using Tabcorp and a clutch of US-based groups), produces minus 26.9 per cent a year TSR.

Just to emphasise the difference: the Packer package grew by 5.8 per cent a year over the four years; the media and gaming peers went not just backwards, but significantly backwards.

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