Value Investing Memo from Howard Marks: "Which Way Now?" |
| Memo from Howard Marks: "Which Way Now?" Posted: 31 Mar 2020 02:36 PM PDT |
| LSE:BSD small cap illiquid stock asset play Posted: 31 Mar 2020 09:51 AM PDT So BSD itself I have almost no interest in, it seems to loan money to other companies and doesn't seem like a good company. They also have an extremely shady past with a Ukranian oligarch who used to own majority shares having money laundered and stolen money from the company. New management has been installed since however that has zwi williger and joseph williger (brothers) who have taken a majority share and have been purchasing huge amounts of the stock recently. So this former problem should no longer be an issue. These brothers both started another company called Willi food (NASDAQ:WILC) which is a supplier of kosher foods, vegetables, milk etc in israel. The reason why LSE:BSD is a good value buy imo is because it owns the majority of WILC shares and WILC trades at a significant premium compared to LSE:BSD on the market which means their is a very good chance LSE:BSD is undervalued. Numbers converted to GBP as of 21/03/2020: BSD owns 5,800,000 WILC shares. BSD has 129,000,000 shares outstanding. WILC trades for £8.58 per share BSD trades for £0.22 per share Total worth of BSD owned WILC shares: £50m Worth of BSD owned WILC shares each: £0.38 What the above calculations mean is that for every BSD share you buy for £0.22 you are essentially getting the economic value of a WILC share which is worth £0.38. The shares in WILC that BSD holds is worth almost 2x the value of the entire market cap of BSD. Even if you think BSD's own cash flow and net income are terrible and worth a negative, their is no way it should be this cheap. Not only that but the market cap of BSD is slightly higher than the enterprise value and WILC market cap is almost 2x it's own enterprise value, which means it's essentially even cheaper than the above calculation. Also the liquidation value of BSD worst case scenario using benjamin graham's NNWC is currently this: BSD NNWC = £26m cash + £9.24 AR + £2.77 Inv - £7.71 liab = £30m BSD Net-Net Working Capital Per share = £0.23 Which means that if the company went bankrupt today and liquidated it's assets you would get £0.23 for every share. Usually when companies are trading at 1-1 NNWC they have serious issues but not BSD. The best way to own a great company like WILC isn't to buy it. It's to buy BSD. Currently the company ran into not having enough shares in the hands of the EU public to be listed on the LSE (25%), so whether they buy the remaining shares at a premium and take it private or delist it I have no idea. But I don't really care either way as this is a long hold for me. I am long BSD. [link] [comments]  |
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