Let’s face it, you’ve probably thought about owning your own sports team. Be it AFL, NRL or even ANBL, it doesn’t get much cooler than dropping into a conversation “I own that team”.
Most of us don’t have the kind of money required to own a team outright and the only listed sports team on the ASX is the Brisbane Broncos (ASX: BBL). So are the Broncos a serious investment, or are you better to take a punt on the team winning at the local Tatts (ASX: TTS)?
As a business Brisbane Broncos’ operations are relatively simple. The team the company owns competes in the NRL Telstra Premiership and it makes money from ticket sales, fan memberships, sponsorship and merchandise — all of which should grow if the team performs well.
So far this season the Broncos are ranked 12th out of 16 teams with seven rounds still to play, but for the first half of the 2013 financial year, the company is forecasting a 22% increase in pre-tax profit. The company says it has attracted higher sponsorship from the likes of primary sponsor NRMA Insurance, a subsidiary of insurance giant Insurance Australia Group (ASX: IAG), as well as higher NRL Club Grants which contributed $7 million this year, up from $5 million in 2012.
This season’s ranking suggests a slide in form for the team which finished 8th in 2012 and 3rd in 2011. However profit and revenue have not followed suit. Net profit after tax (NPAT) for the full year 2012 grew by 58% to $2.15 million, on revenues of $32.9 million and the company sports a balance sheet clear of debt.
According to one article by Forbes, sports teams have historically offered poor returns. However the share price of both Brisbane Broncos and football super brand Manchester United Limited (NYSE: MANU) are up by 20% over the last 12 months.
The Brisbane Broncos have a palatable price-to-earnings ratio of 12.5 and a heavy hitting dividend of 6.3%. The company also held over $16 million in cash at 31 December 2012, making up about 60% of the $27 million market capitalization.
For the remainder of the year management caution that half-year results “cannot be taken as an indication of a full year trend”, in part because the results “could be materially impacted by attendances at our remaining home games.”
NRL is an enduring sport and Brisbane Broncos have a proud history and a strong fan base. This year’s stunted season is unlikely to see that lost, but the unpredictability of future season results isolates this otherwise strong company to the realms of speculation.
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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.