Special Situation With 118% SH Yield...
Property assets worth 3x stated book value, aggressively returning capital to shareholders.
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Today’s set-up is ideal for anyone that loves a good asset-play.
I normally prefer set-ups that have margin of safety in both the earnings and the assets, but sometimes I find things that are too interesting to ignore.
The reason this one is so compelling is that there is a huge disconnect between today’s price and the real-world value of the assets.
This is more of a special-situation than a traditional business-purchase.
It’s a tiny nano-cap stock with low-liquidity.
Patience is required.
The FCF has also been slightly negative, which means they are burning cash YoY, but the tangible asset value is humongous.
The current price implies that those assets are worthless or that the management team will erode them away on frivolous pursuits.
The financial statements reveal a massive disconnect between the stock price and the tangible liquidation value of the business.
They also show a management team aggressively returning the value to shareholders.
This is a classic deep-value play where the downside is protected by cash and the upside is obscured by accounting conventions.
To illustrate this disconnect, the current market cap is trading at just 0.35x the tangible book value.
This alone would be extreme, given the assets are basically properties.
However, those properties are actually worth around 3.5x the stated book value.
This takes the margin of safety into stratospheric levels of cover.
It gets better.
The company also holds net-cash worth around 50% of the current market cap.
There isn’t any significant debt (relative to the cash).
There is nothing in the ownership structure that indicates an involuntary delisting could occur any time soon.
The free-float is over 70% of the share-base and the majority owner only holds 26% of the stock and voting power.
Let’s take a closer look at the valuation…