A Net-Net With £3.5B in Revenue
A high-quality business with a market-leading brand for less than its inventory.
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Today’s business is being priced below the value of its current assets.
This implies that the operating business is worth nothing and that most of the tangible assets will be eroded away until nothing is left.
This is very far from the reality of the situation.
For starters, this business has a very strong brand and foothold in its industry.
Even if we forget the tangible assets that could be sold in the real-world, the business itself has a strong pedigree going back decades.
This isn’t some majority controlled Japanese manufacturing firm.
Its ownership structure is dominated by institutional shareholders and the free-float is huge.
In other words, there is a very strong probability that this business doesn’t die, isn’t liquidated, and continues generating cash flows for the foreseeable future.
And, as soon as that becomes clear, the stock price will re-rate very nicely.
In the meantime, the downside risk is capped by the sheer volume and quality of the asset-base.
Let’s take a look…