Retail Holdings update

Retail Holdings has seen an action packed week. Chris DeMuth Jr., one of the most popular Seeking Alpha authors, published his thesis on the company last week and called it his top pick for 2017. The market didn’t ignore him, and shares rose 25.8% from $14.70 to $18.50. One interesting tidbit that he picked up on, that I failed to spot, is that in the latest annual report the company changed their time frame for the liquidation of the company from 3 to 5 years to 2 to 4 years. It seems like a small detail, but no reason to change that if the liquidation of the company isn’t moving forward.

Yesterday Retail Holdings issued a press release with an “updated strategy statement” that reconfirms this two to four year horizon. More interesting is that they also confirm that they repurchased 542,782 shares last year, a significant amount since it represents 10.6% of the outstanding shares. Assuming they bought back these shares at $15/share (probably a slightly pessimistic estimate) this grows NAV/share with 5.4% from $27.39 to $28.87. Too bad that the shares are now trading higher, since potential future purchases will be less accretive since they have to be done at a smaller discount to NAV.

While I think Retail Holdings is still very undervalued I sold a bit of my position this week. When I called the company “my best idea for 2016” on Seeking Alpha it was trading at an effective discount of 61.5%. Since then shares are up ~70% while the discount is down to 35.9%. Still attractive, just not as attractive as before.

Disclosure

Author is long Retail Holdings

12 thoughts on “Retail Holdings update

    1. Don

      My calculation also deducts $4.8mm for the CEO deferred cash award and ~$2mm for Compensation fee for directors and officers.

      Reply
      1. Alpha Vulture Post author

        That might be a bit more correct, although this calculation also doesn’t include the money that the company presumably has earned between the date of the latest financial report and now.

        Reply
  1. ADL

    Have you looked at OGXI? Former biotech shell trading at ~60% cash which just announced a merger with a private pharma co. Not necessarily a very exciting setup but the deal will include a CVR for 80% of the proceeds from the sale (if completed in 6 months) of OGXI’s not-dead phase II-testing-completed drug. Maybe too many conflicts, but could be interesting.

    Reply
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  3. Mikael

    Thanks for the update. I am holding and expect continued strong performance at operating companies. I estimate float to be around 4.2 million by March of this year. I would say the Co sells around 30% of its market value each year for the next three years.

    Reply
  4. Jae Lee

    Thanks for a great article. Once the liquidation occurs, what tax rate will US shareholders be subject to? Even if the company is in Curacao, I imagine they have to be taxed a dividend rate for remittances back into the US. Along wiht the fact that 20% equity in Bangladesh, cannot leave the country, doesn’t this wipe out a pretty sizeable gain?

    Reply
      1. Jae Lee

        Thanks for the reply. You’re right, the tax information they release shows that past dividends have been non-taxable. Quick question on Bangladesh – past method of liquidation ReHo pursued has been to sell stakes to local investors. As long as they sell 20% of the whole stake to local investors, can they bring back the cash generated to shareholders?

        Reply

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