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Today’s business has one of the cheapest valuations I’ve ever seen in my entire life.
It generates roughly £75m in annual revenue (converted from its reporting currency).
It trades at roughly a quarter of its adjusted TBV.
The cash and marketable securities alone are worth more than twice the market cap.
And the underlying operating businesses are profitable.
Really profitable.
As you probably know by now, all of my analysis is based on actually buying the business whole, in the real world.
Cash is only interesting to me if I could extract it to buy yachts.
Assets are only interesting to me if they can be sold for cash, in an orderly, real-world liquidation.
And operating businesses are only interesting to me if they are likely to keep trundling along for the foreseeable future (more cash for yachts).
The real-world-owner analysis for this business is highly compelling.
After fiddling around with my big-buttoned calculator, I reckon I could buy the company and extract the full acquisition cost in under three years.
Afterwards, I’d still own the operating businesses, substantial remaining cash and more than three times our original purchase price in adjusted TBV.
I also estimate continuing annual owner-free cash flow equivalent to roughly 16% of the original purchase price, even after the acquisition cost extraction.
The sheer scale of this value disconnect was impossible to ignore.
Just to help illustrate this, here are the valuation ratios AFTER we extract our initial purchase cost:
NCAV = 0.5
TBV = 0.3
Owner-FCF = 6
In other words, it would still be ridiculously cheap even after it becomes totally risk-free.
This is the perfect candidate for a small, diversified portfolio of deep value net-nets and cigar butts.
Let’s take a look...