Update on 1/26/06 Column: Top 10 market cap companies trading below NCAV
We last published a top 10 list such as this back in January, and this column proved to be extremely popular with our readers. Below is the original list, with returns since January.
Company: Trans World Entertainment
Ticker: TWMC
January Price: $4.77
Current Price: $6.23
Return: +30.6%
Industry: Retail/music & video
Report Available
Company: Dominion Homes
Ticker: DHOM
January Price: $10.2
Current Price: $10.49
Return: +2.8%
Industry: Home Building
Company: Lazare Kaplan
Ticker: LKI
January Price: $8.64
Current Price: $8.25
Return: -4.5%
Industry: Diamonds
See last week’s report
Company: Discovery Partners
Ticker: DPII
January Price: $2.5
Current Price: $2.56
Return: +2.4%
Industry: R&D
See Report
Company: Axonyx
Ticker: AXYX
January Price: $.94
Current Price: $.95
Return: +1.1%
Industry: Biotech
Company: Praecis Pharmaceutical
Ticker: PRCS
January Price: $4.32
Current Price: $5.57
Return: +29%
Industry: Medical/Pharma
Company: Pharmos Corp
Ticker: PARS
January Price: $2.15
Current Price: $2.41
Return: +12.1%
Industry: Drug Delivery
Company: Remec Inc
Ticker: REMC
January Price: $1.3
Current Price: $1.14
Return: -12.3%
Industry: Wireless Equipment
Company: Intrabiotics
Ticker: IBPI
January Price: $3.65
Current Price: $3.42
Return: -6.3%
Industry: Medical-Drugs
Company: Peak Intl
Ticker: PEAK
January Price: $2.49
Current Price: $2.89
Return: +16.1%
Industry: Semiconductor Equip
There you have it. The companies on the January 26 list returned an average of 7.1% since that report. Next week, we'll re-run the list to see who the current top 10 NCAV companies are.
*The author has positions in DPII and LKI. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Sunday, June 04, 2006
Monday, May 29, 2006
Anyone For Some Louisiana Swamp Land?
Biloxi Marsh Lands Corp
Ticker: BLMC
Market cap: $83.8 million
Price: $30.00
Average Volume:1700
By now you’ve gotten used to (or are getting tired of) the off the beaten path ideas we often feature here at Cheap Stocks. It’s not that we are trying to be different, we just believe there is a whole other world of investment ideas out there for investors besides the Microsofts, Home Depots, Harleys, and all the other big names institutions own. Not that there’s anything wrong with any of these companies. But they have been researched to death, and there is no new information under the sun. The dead horse has bean beaten, so to speak.
While we try to come up with original ideas, we are the first to admit when they don’t originate from our research alone. Take this week’s company, Biloxi Marsh Lands Corp. Last year we received a few e-mails asking for our opinion, or whether we had any research on this company. Truth be told, at the time, we’d never heard of the company. Fast forward to last week’s e-mail from a reader asking if we covered BLMC, as he’d seen our research on Avoca. Reader, we hear you loud and clear. Thanks for the idea, even if it was not ours. (We are big believers in honesty here at Cheap Stocks).
Biloxi Marsh Lands Corp, which trades on the pink sheets, and is not required to file with the SEC, owns 90,000 acres in St. Benard Parish in Louisiana. The majority of company revenue is from oil and gas exploration and production taking place on company land. 2005 revenue of $22.5 million was up slightly from 2004’s $22.2 million. This was due primarily to an increase in natural gas prices. Net income also rose, to $13.9 million, from $13.8 million.
First quarter 2006 revenue was $8.35 million, up from $6.8 million for the same quarter last year. The increase was due to rising oil and gas prices, and a one time change in revenue recognition. Net income rose to $5.3 million from $4.5 million.
The Land
Sure, we could do our typical Enterprise Value/Acre calculation we are becoming know here at Cheap Stocks, but keep in mind this is marsh land, 90,000 acres of it, which is about 14 square miles. This is not St. Joes, nor JG Boswell quality land. Its value is from the contents that lie beneath. There’s probably little use or value besides. (Ok, we can’t help ourselves. With an enterprise value of $83.8 million, and 90,000 acres, that’s an EV/acre of $931)
The Balance Sheet
As of 3/31/2006, the company had $1.6 million in cash, and $19.5 million in LT marketable securities, to go along with no debt. With 2.85 million shares outstanding, that equates to about $7.00 per share in cash and securities. The land itself is carried at cost, a paltry $234,939, or $2.61 per acre. We don’t know its true value, but granted, the oil and gas beneath are worth significantly more than carrying value.
The Dividend
During 2005, the company paid 3 dividends, for a total of $3.25 per share. In 2006, the company paid a $2.00 dividend in January. BLMC recently stated in its first quarter earnings release that it intends to “equal or exceed the amount of dividends paid in 2005”. That statement got our attention. Assuming the company equals 2005 payout, ($3.25 per share), that equates to an 11% yield at current prices. If that ends up happening, we’d expect some share price adjustment above the current level. Keep in mind, BLMC was a $60 stock just one year ago, and has not yet come close to pre-Katrina levels.
The Risks
In our minds there are two risks or factors that are either weighing on this stock, or could if conditions change. The first is what we’ll call a “Hurricane Discount”. This company’s production was affected by Katrina and Rita, and with another hurricane season approaching, this no doubt weighs on the stock. The second is the price of natural gas. If gas stays relatively high or rises, the expected dividends should follow, they may even rise. If gas falls, so will revenue, and further dividends this year (the company usually pays one dividend per year, last year it paid three) may be at risk.
Conclusion
Once again, some of the most interesting stories are lurking in the pink sheets. This company reminds us of Avoca (in which we have a position), but has much greater liquidity (if you consider 1700 shares/day liquidity). At $30.00 per share, it’s compelling, but not without a degree of risk. If you were interested in Avoca, and its fat yield, but wary of the $5500 price tag and lack of available of shares, this one might be for you. BMLC has 2.8 million shares outstanding, while Avoca has just 8 thousand.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Biloxi Marsh Lands Corp
Ticker: BLMC
Market cap: $83.8 million
Price: $30.00
Average Volume:1700
By now you’ve gotten used to (or are getting tired of) the off the beaten path ideas we often feature here at Cheap Stocks. It’s not that we are trying to be different, we just believe there is a whole other world of investment ideas out there for investors besides the Microsofts, Home Depots, Harleys, and all the other big names institutions own. Not that there’s anything wrong with any of these companies. But they have been researched to death, and there is no new information under the sun. The dead horse has bean beaten, so to speak.
While we try to come up with original ideas, we are the first to admit when they don’t originate from our research alone. Take this week’s company, Biloxi Marsh Lands Corp. Last year we received a few e-mails asking for our opinion, or whether we had any research on this company. Truth be told, at the time, we’d never heard of the company. Fast forward to last week’s e-mail from a reader asking if we covered BLMC, as he’d seen our research on Avoca. Reader, we hear you loud and clear. Thanks for the idea, even if it was not ours. (We are big believers in honesty here at Cheap Stocks).
Biloxi Marsh Lands Corp, which trades on the pink sheets, and is not required to file with the SEC, owns 90,000 acres in St. Benard Parish in Louisiana. The majority of company revenue is from oil and gas exploration and production taking place on company land. 2005 revenue of $22.5 million was up slightly from 2004’s $22.2 million. This was due primarily to an increase in natural gas prices. Net income also rose, to $13.9 million, from $13.8 million.
First quarter 2006 revenue was $8.35 million, up from $6.8 million for the same quarter last year. The increase was due to rising oil and gas prices, and a one time change in revenue recognition. Net income rose to $5.3 million from $4.5 million.
The Land
Sure, we could do our typical Enterprise Value/Acre calculation we are becoming know here at Cheap Stocks, but keep in mind this is marsh land, 90,000 acres of it, which is about 14 square miles. This is not St. Joes, nor JG Boswell quality land. Its value is from the contents that lie beneath. There’s probably little use or value besides. (Ok, we can’t help ourselves. With an enterprise value of $83.8 million, and 90,000 acres, that’s an EV/acre of $931)
The Balance Sheet
As of 3/31/2006, the company had $1.6 million in cash, and $19.5 million in LT marketable securities, to go along with no debt. With 2.85 million shares outstanding, that equates to about $7.00 per share in cash and securities. The land itself is carried at cost, a paltry $234,939, or $2.61 per acre. We don’t know its true value, but granted, the oil and gas beneath are worth significantly more than carrying value.
The Dividend
During 2005, the company paid 3 dividends, for a total of $3.25 per share. In 2006, the company paid a $2.00 dividend in January. BLMC recently stated in its first quarter earnings release that it intends to “equal or exceed the amount of dividends paid in 2005”. That statement got our attention. Assuming the company equals 2005 payout, ($3.25 per share), that equates to an 11% yield at current prices. If that ends up happening, we’d expect some share price adjustment above the current level. Keep in mind, BLMC was a $60 stock just one year ago, and has not yet come close to pre-Katrina levels.
The Risks
In our minds there are two risks or factors that are either weighing on this stock, or could if conditions change. The first is what we’ll call a “Hurricane Discount”. This company’s production was affected by Katrina and Rita, and with another hurricane season approaching, this no doubt weighs on the stock. The second is the price of natural gas. If gas stays relatively high or rises, the expected dividends should follow, they may even rise. If gas falls, so will revenue, and further dividends this year (the company usually pays one dividend per year, last year it paid three) may be at risk.
Conclusion
Once again, some of the most interesting stories are lurking in the pink sheets. This company reminds us of Avoca (in which we have a position), but has much greater liquidity (if you consider 1700 shares/day liquidity). At $30.00 per share, it’s compelling, but not without a degree of risk. If you were interested in Avoca, and its fat yield, but wary of the $5500 price tag and lack of available of shares, this one might be for you. BMLC has 2.8 million shares outstanding, while Avoca has just 8 thousand.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Thursday, May 18, 2006
Hats Off to Avoca Inc (AVOA)
A Credit to SarbOx Avoiders
If you read our previous post regarding Scheid Vineyards delisting, and de-SarbOxing primarily to save money, you'll remember that de-listing absolves companies with less than 300 shareholders of filing with the SEC.
Your Cheapstocks editor currently has positions in two companies that don't file, JG Boswell (BWEL) and Avoca Inc. (AVOA). Although Boswell has performed well for us, there are no investor communications provided. We are in this one on faith and gut. The only communication I've ever received from Boswell, was information on a company self tender offer in 2004. Nothing since then.
Avoca, on the other hand, continues to send quarterly and annual financials. Avoca is a small royalty trust that owns 16000 acre Avoca island, which is off the coast of New Orleans. Their primary revenue source is royalties from gas leases on the island. We received a report for Q1 today. For the record, sales tripled to $3.6 million from the same period last year, and net income nearly quadrupled to $2.5 million, oe $309.71 per share.
No, that is not a misprint, they really earned $309.71. Avoca split 1 for 100 in early 2005 in order to delist, which left the company with just 8,057 shares outstanding. You can imagine what that does to liquidity. The stock currently "trades" on the pink sheets, with a current bid of $5000. In 2005, they paid a $400 dividend ($350 the year before), and if Q1 is any indication, that should rise nicely for the next annual dividend (Dec 2006).
If you have any interest in this company, be very cautious. I believe there is tremendous value there, and between our originl purchase price, and two nice dividends, we've doubled our money in just over one year. But there just aren't many shares to go around, and both entry and exit will be difficult. There's a lesson in there...be careful when placing orders, especially when there is little liquidity, and wide spreads. That's what limit orders are for.
In any event, our hats go off to tiny Avoca, a $40 million market cap powerhouse.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
A Credit to SarbOx Avoiders
If you read our previous post regarding Scheid Vineyards delisting, and de-SarbOxing primarily to save money, you'll remember that de-listing absolves companies with less than 300 shareholders of filing with the SEC.
Your Cheapstocks editor currently has positions in two companies that don't file, JG Boswell (BWEL) and Avoca Inc. (AVOA). Although Boswell has performed well for us, there are no investor communications provided. We are in this one on faith and gut. The only communication I've ever received from Boswell, was information on a company self tender offer in 2004. Nothing since then.
Avoca, on the other hand, continues to send quarterly and annual financials. Avoca is a small royalty trust that owns 16000 acre Avoca island, which is off the coast of New Orleans. Their primary revenue source is royalties from gas leases on the island. We received a report for Q1 today. For the record, sales tripled to $3.6 million from the same period last year, and net income nearly quadrupled to $2.5 million, oe $309.71 per share.
No, that is not a misprint, they really earned $309.71. Avoca split 1 for 100 in early 2005 in order to delist, which left the company with just 8,057 shares outstanding. You can imagine what that does to liquidity. The stock currently "trades" on the pink sheets, with a current bid of $5000. In 2005, they paid a $400 dividend ($350 the year before), and if Q1 is any indication, that should rise nicely for the next annual dividend (Dec 2006).
If you have any interest in this company, be very cautious. I believe there is tremendous value there, and between our originl purchase price, and two nice dividends, we've doubled our money in just over one year. But there just aren't many shares to go around, and both entry and exit will be difficult. There's a lesson in there...be careful when placing orders, especially when there is little liquidity, and wide spreads. That's what limit orders are for.
In any event, our hats go off to tiny Avoca, a $40 million market cap powerhouse.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Saturday, May 13, 2006
Getting Around Sarbanes Oxley
Scheid Vineyards (SVIN)
You may have seen our original post on this issue back in 12/04. We folowed up on this interesting issue with another report on 2/22/05.
I'd urge you to read those reports for background, but in summary, some small publicly traded companies have found a way to stay publicly traded, while avoiding filing with the SEC, and costly compliane with Sarbanes Oxley. The way to do this is to reduce shareholder roles to 300 or less. Companies have gotten creative in their attempts to make this happen. One way is to effect a reverse split, then buy out very small shareholder positions for cash. For instance, by effecting a 1 for 100 reverse split, any shareholder with less than 100 shares will be left with a fractional share, which is then bought back by the company. Once below 300 shareholders, the company files a from 15-12G with the SEC, which effectively ends their need to file with the SEC, or comply with SarbOx. For some companies, this can drastically cut pre-tax expenses.
The Downsides
While avoiding somewhat prohibitive costs, and freeing up senior staff who spend a lot of their time on SarbOx issues are pluses, there are negatives to be aware of. First, many of these companies go from barely trading to never trading. Their shares outstanding drop proportianate to the reverse split, so often there is little in terms of public float. While these companies continue to trade, they do so on the pink sheets, and bid/ask spreads tend to be very wide. There is little, if any liquidity in these companies. If you find one that is compelling, be prepared to hold for a long time. Finally, once these companies no longer file, it is sometimes very difficult, even for shareholders to get information. Your Cheapstocks editor currently owns positions in two companies which no longer file, Avoca, which still sends out quarterly reports, and JG Boswell, which does not. (Incidentally, JG Boswell has never filed as far as I know, and was not part of the latest wave of companies avoiding filing).
Scheid Vineyards
Ticker: SVIND
Price: $32.10
Market Cap: $25.84 million
Shares Out: 805 thousand
P/E: 8
Enterprise Value: $70 milliom
Scheid Vinyards is a small, California based grape and bulk wine producer. The company grows 17 varieties of grapes, most of which are sold under short and long term purchase agreements. The company also makes bulk wine with a portion of the grapes. Your Cheap Stocks editor has followed this company on and off for the past five years, but to date, has yet to pull the trigger. We first learned of this company when we discovered they were a dividend paying stock, but not in the traditional sense. The dividend in this case was a wine dividend. As we recall, it was good for a 50% discount on a case of Scheid wine.
The Fundamentals
Fiscal Year 2005 sales were up 51 percent from $23.6 million to $31.2 million. Net income rose sharply, from $1.3 million in 2004 to $4.4 million in 2005. Grape growing is a tough industry, dependent not only on weather, but also the ultimate quality and supply. Hence, Scheid's sales and earnings numbers can jump around quite a bit from year to year.
Scheid's balance sheet is not great, with $1.2 million in cash, but $36 million in long term debt. Bolstering this is Scheid's land holdings. Of the 5700 acres the company operates, it owns 1800, or nearly 3 square miles, in Monterey. California. On an Enterprise value/Acre calculation, (one that we are both fond of, and we believe originated) that's $23,333. Does not sound cheap based on the land alone, but we admit that we don't know what a vineyard acre in Monterey is worth.
"Going Private":The Reverse Stock Split
The company's recent 1 for 5 reverse stock split was intended to reduce shareholder roles below the magic 300 shareholder level. This allowed the company to de-list its stock fropm NASDAQ, while still allowing it to trade on the pink sheets. The main purpose for this was to save the company an estimated $485,000 in annual fees, broken down as follows:
Audit and Accounting
$ 100,000
Legal Fees
50,000
Stockholder Expenses
30,000
Nasdaq Fees
18,000
Miscellaneous
37,000
Internal Control Compliance*
250,000
Total
$ 485,000
While $485,000(pretax) may seem like a pittance to many companies, its substantial to a company that earned $4 million last year. The other potential benefit is that management will no longer spend time and energy on SarbOx and SEC related issues, allowing it to focus more on the business. We'll see if they are succesful.
We are interested in Scheid's situation and will follow it closely. For more on the de-listing, please read the companies latest proxy, which goes into great detail about the process and reasoning.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Scheid Vineyards (SVIN)
You may have seen our original post on this issue back in 12/04. We folowed up on this interesting issue with another report on 2/22/05.
I'd urge you to read those reports for background, but in summary, some small publicly traded companies have found a way to stay publicly traded, while avoiding filing with the SEC, and costly compliane with Sarbanes Oxley. The way to do this is to reduce shareholder roles to 300 or less. Companies have gotten creative in their attempts to make this happen. One way is to effect a reverse split, then buy out very small shareholder positions for cash. For instance, by effecting a 1 for 100 reverse split, any shareholder with less than 100 shares will be left with a fractional share, which is then bought back by the company. Once below 300 shareholders, the company files a from 15-12G with the SEC, which effectively ends their need to file with the SEC, or comply with SarbOx. For some companies, this can drastically cut pre-tax expenses.
The Downsides
While avoiding somewhat prohibitive costs, and freeing up senior staff who spend a lot of their time on SarbOx issues are pluses, there are negatives to be aware of. First, many of these companies go from barely trading to never trading. Their shares outstanding drop proportianate to the reverse split, so often there is little in terms of public float. While these companies continue to trade, they do so on the pink sheets, and bid/ask spreads tend to be very wide. There is little, if any liquidity in these companies. If you find one that is compelling, be prepared to hold for a long time. Finally, once these companies no longer file, it is sometimes very difficult, even for shareholders to get information. Your Cheapstocks editor currently owns positions in two companies which no longer file, Avoca, which still sends out quarterly reports, and JG Boswell, which does not. (Incidentally, JG Boswell has never filed as far as I know, and was not part of the latest wave of companies avoiding filing).
Scheid Vineyards
Ticker: SVIND
Price: $32.10
Market Cap: $25.84 million
Shares Out: 805 thousand
P/E: 8
Enterprise Value: $70 milliom
Scheid Vinyards is a small, California based grape and bulk wine producer. The company grows 17 varieties of grapes, most of which are sold under short and long term purchase agreements. The company also makes bulk wine with a portion of the grapes. Your Cheap Stocks editor has followed this company on and off for the past five years, but to date, has yet to pull the trigger. We first learned of this company when we discovered they were a dividend paying stock, but not in the traditional sense. The dividend in this case was a wine dividend. As we recall, it was good for a 50% discount on a case of Scheid wine.
The Fundamentals
Fiscal Year 2005 sales were up 51 percent from $23.6 million to $31.2 million. Net income rose sharply, from $1.3 million in 2004 to $4.4 million in 2005. Grape growing is a tough industry, dependent not only on weather, but also the ultimate quality and supply. Hence, Scheid's sales and earnings numbers can jump around quite a bit from year to year.
Scheid's balance sheet is not great, with $1.2 million in cash, but $36 million in long term debt. Bolstering this is Scheid's land holdings. Of the 5700 acres the company operates, it owns 1800, or nearly 3 square miles, in Monterey. California. On an Enterprise value/Acre calculation, (one that we are both fond of, and we believe originated) that's $23,333. Does not sound cheap based on the land alone, but we admit that we don't know what a vineyard acre in Monterey is worth.
"Going Private":The Reverse Stock Split
The company's recent 1 for 5 reverse stock split was intended to reduce shareholder roles below the magic 300 shareholder level. This allowed the company to de-list its stock fropm NASDAQ, while still allowing it to trade on the pink sheets. The main purpose for this was to save the company an estimated $485,000 in annual fees, broken down as follows:
Audit and Accounting
$ 100,000
Legal Fees
50,000
Stockholder Expenses
30,000
Nasdaq Fees
18,000
Miscellaneous
37,000
Internal Control Compliance*
250,000
Total
$ 485,000
While $485,000(pretax) may seem like a pittance to many companies, its substantial to a company that earned $4 million last year. The other potential benefit is that management will no longer spend time and energy on SarbOx and SEC related issues, allowing it to focus more on the business. We'll see if they are succesful.
We are interested in Scheid's situation and will follow it closely. For more on the de-listing, please read the companies latest proxy, which goes into great detail about the process and reasoning.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
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