Listed football clubs: Where to find value

7 things every investor should know about Borussia Dortmund

With its fans creating the spellbinding sight known as ‘the Yellow Wall’, Borussia Dortmund is a leading German football club. Now its Q2 trading update has been published – watch the video here – it’s a good time to decide whether its sporting performance could translate to financial success in your portfolio.

1. Borussia Dortmund looks very undervalued

An asset-based valuation of the club suggests it might be worth more than double its current market cap. The valuation is lower than estimates of the playing squad alone. In fact, Edison analyst Russell Pointon, director of consumer and media, sees an upside of 144% in his latest report. The EV/sales stats below also make interesting reading.

2. Revenue sources are resilient

Despite the impact of COVID-19, three of the company’s five revenue streams grew year-on-year (y-o-y). These include the two largest – advertising and TV marketing, with a new sponsor helping to lift advertising by 13% y-o-y, to €29.9m.

3. Management is efficient

The Q2 update showed higher profitability y-o-y. While total revenues were a little lower, as fans were not in the stadium, tight cost controls drove spending even lower.

4. Upswing when life returns to normal?

Providing the club can deliver decent results on the pitch, our analysis suggests Borussia Dortmund should be a prime beneficiary of life returning to normal. Growth in revenues is projected to outstrip growth in costs.

5. The stock has been far higher previously and there are few listed football clubs

In the past year, Borussia’s highest share price was €9.39. At market close on 10 February, it was €5.14.

6. The club is financially conservative

Borussia is not fuelled by debt like many of its peers. Before COVID-19, the company operated with a stable net cash position.

7. Borussia Dortmund has a long history of footballing success

Borussia Dortmund has played in nine of the last 10 seasons of the Champions League, Europe’s pre-eminent and most financially lucrative competition.

Thank you for reading. If you’d like a more in-depth look at Borussia Dortmund, please watch the Q2 update video, download Edison’s latest report and current outlook note: Another brick in the Yellow Wall. Borussia Dortmund is a client of Edison Group.

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