Monday, February 20, 2017

Retail Holdings (RHDGF) undervalued by $11 per share

I am adding Retail Holdings (RHDGF) to my portfolio. The company put out a strategy statement on 1/4/2017. The strategy statement said the following;

(snip)

Retail Holdings N.V. (the “Company”), has as its principal asset, a 54.1% equity interest in Sewko Holdings Limited (“Sewko”), the parent company of Singer Asia Limited, with retail and financial services businesses in Bangladesh, India, and Sri Lanka. Sewko’s core business is the distribution of consumer durable products, primarily for the home, with supportive manufacturing, and with consumer credit and other financial services.

The strategy of the ultimate public holding company (hereinafter referred to as “ReHo”), is to
maximize and, ultimately, to monetize the value of its assets. The Company intends to make regular
cash distributions to its shareholders and to opportunistically repurchase its Shares. The objective is to liquidate ReHo, with a two to four-year time horizon, and distribute the resulting funds and any
remaining assets to its shareholders. 

This strategy statement is why I am buying shares. The current share price of the Retail Holdings is $18.20. Because the components of Sewko are publicly traded we can know the approximate value of the 54.1% equity stake that Retail Holdings currently holds.

I built a spreadsheet and calculated the parts of the whole equal to a net asset value of $29.48. At the current share price that means it is undervalued by $11 per share.

We know from the company strategy statement that the management intends on liquidate the company and pay off shareholders. As long as the parts of the company don't fall apart then we should see a nice profit over the next couple of years.

This is a small company and quite few articles have been written about it since the beginning of the year. The share price has moved up around $3 per share since the beginning of the year. The stock is lightly traded so if you are buying than please use limit orders.

Buying assets below net asset value is a theme with me i.e. (Fondul Proprietatea, Vietnam Opportunity Fund). Retail Holdings is a similar situation.




1 comment:

Anonymous said...

RHDGF is a value play that will divest of all its holdings and return capital to its shareholders within a 1-3 year horizon. I expect a strong +$1 dividend this year in addition to a possible sale of a third of its holdings in Singer Bangladesh and Singer Sri Lanka. IMO this will add an additional $6-$7 per share in a reduced float of 4.5 million shares. This hidden gem might be the best investment in any global market. Please look at the individual web sites of the operating companies. They are on fire.

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