Property

MU Hitting Long Cross to HKEX

MU Hitting Long Cross to HKEX

Igniting Craze for Red Devils in Asia

The market focus was recently shifted to English Premier League Manchester United’s interest in listing in HK. The news not only made millions of the Red Devils’ fans excited, it could ignite the craze for football clubs to list in HK. Premier League of last season has just been over after 38 rounds of thrilling matches. Manchester United, whose club is located in Manchester City, beat Chelsea and achieved the club’s 19th championship by 80 pts. Despite its defeat to Barcelona ‘the invincible’ at UEFA Champions League (1:3), the club’s planned internal and external deployment remains the same.

During the summer, Sir Alex Ferguson, Manchester United’s manager since 1986, landed £16.5 million and £16 million shirtdeals for Phil Jones, young center half back in England U21, and Ashley Young, midfielder in England team. The fans are looking forward to having a dominant midfield for the Premiership next season, or even another UEFA Champion since 2008. In 2005, Manchester United marked another milestone with a substantial management reshuffle. The Glazer family presided and privatized the club for £790 million, of which £272 million was in cash payment while the remaining £518 million was by borrowing. Since then, Manchester United became quite a heavily indebted Premier League team over the past six years.

The Glazer family’s borrowing amount is reportedly more than £388 million and it has also assumed £700 million liability in the name of the club. While the club’s business gross income for the year 2006, 2007, 2008, 2009 and 2010 reached £243 million, £315 million, £325 million, £327 million and £350 million respectively, the huge interest and other expenses seriously eroded the profits. In view of the 2009/2010 annual results, the business profit of HK$1.273 billion ultimately turned into loss of HK$1.056 billion due to interest and other expenses.

According to published by Deloitte earlier, Manchester United ranked third of the top ten highest-income clubs for the 2009-2010 season when £327 million income was recorded, next only to Real Madrid and Barcelona, the two major clubs in La Liga. As segmental analysis, the incomes from match tickets, Premiership live broadcast and advertising account for about 35%, 37% and 28%. In the 2009-2010 season, the amounts were £122 million, £128 million and £99.4 million respectively.

Some analysis stated the weakened ticket income of Manchester United’s away matches will be compensated by the robust live broadcast and advertising income as the commercial value of Premier League climbs to £1.24 billion in 2011. More importantly, the ticket income from the home matches can be maintained at £3.6 million and the future advertising income will continue higher on its promotional cooperation with such large-scale enterprises as Aon, Turkish Airlines, Betfair and Thomas Cook.

The club’s management reportedly came to HK to discuss the possibility of listing with three to four investment banks in the first quarter. The Glazer family hoped to achieve a higher median valuation and an offer price substantially higher than that in the UK. As preliminary estimates, the valuation by investment banks reaches £1.7 billion, or HK$21.5 billion, which makes it the world’s richest club, overtaking Real Madrid and Barcelona, its major enemies in UEFA. As compared with another listed English Premier League club Arsenal, who was valuated at USD1.2 billion, Manchester United has higher-than-twice valuation. Some analysts said considering the net profit of £48 million in 2009 against its £1.7 billion valuation, the P/E of Manchester United on listing would be higher than 35x, far higher than the listed Ligue 1 club Lyon of 28x. It could potentially be the listed football club of the highest P/E.