DAVID MARSH
SENIOR VICE PRESIDENT
FRIEDMAN BILLINGS RAMSEY

COMPANY: International Speedway Corporation
TICKER: ISCA
PRICE: $44.39
52-WEEK RANGE: 43.48–60.15
MARKET CAPITALIZATION: $2.36 billion

David Marsh is the senior entertainment analyst and a senior vice president at Friedman Billings Ramsey, a top-ten investment bank with $1 billion in revenues in 2005. International Speedway Corporation is based in Daytona Beach, Fla. Mr. Marsh spoke to Elisa Mala of The New York Sun about why this steady stock will win the race.

What does the company do?

ISCA owns 11 of the largest motorsports entertainment complexes in the United States, including the Daytona Motor Speedway, which is probably the most famous track in the United States. They also have a 37.5% equity interest in a 12th major facility — the Chicagoland Speedway.

Who are the company’s largest competitors?

The company’s two largest public competitors are Speedway Motor Sports (TRK) and Dover Motor Sports (DVD).

Why do you like this particular stock?

The biggest reason is because we have very good visibility with regard to the company’s revenues, whereas with many other entertainment and leisure companies, you don’t have as much visibility into future revenues and earnings. The reason it’s so strong for this company is because over 50% of the company’s revenues do not come directly from the consumer. About one third of the company’s revenues come from a television broadcast contract that NASCAR has negotiated with a group of television networks. Another 20% or so of their revenues come from corporate sponsorships. For instance, the race that they held over the weekend leading up to July 4th was called the “Pepsi 400.” Pepsi pays ISCA for the right to name that race.

What do you think the stock is worth?

We have a $60 price target. We take 9.2 times our 2007 EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) estimate and then we add $3 to that number to give the company credit for land that it owns but is not currently generating any revenue. The company owns 677 acres of land in Staten Island, where they are exploring the possibility of constructing a new motorsports facility. That asset alone is probably worth a little bit more than $2 per share. In addition to that, they also own 1,200 acres of land in Pikes Peak, Colo., where they’re not currently conducting any racing activities.They’ve contracted to sell a plot of land in Nazareth, Pennsylvania.

What are the risks associated with this stock?

Weather is a significant risk. It affects their walk-up business. Since the events are scheduled a long way out, and you can’t really move the event, that creates a problem. You’re totally subject to what the weather is at the venue for the weekend the race is scheduled. That can really cause significant fluctuations in terms of walk-up admissions and revenues.

There is a small risk that in the future they might not be awarded a race that they are currently awarded, particularly, a Nextel Cup race. That risk is fairly low, but nonetheless, it’s a risk.

The biggest risk is if the popularity of the sport were to decline materially. The corporate sponsorship dollars would go away and the fans would stop coming, so that’s the biggest underlying risk for the company.

Which type of investor is the stock best suited for?

I would definitely not recommend it for the short-term investor. There are no major catalysts in the immediate term that are going to move the stock significantly higher in a short period of time. It’s more of a steady earner and a steady earnings grower over the long term, and that’s really why we like it.