Tejoori Limited: liquidating with a 40% discount to NAV?

40 Replies

Tejoori Limited (LON:TJI) describes itself as a investment company that invests in ethical and Sharia compliant ventures around the world. Like many companies listed on London’s AIM market the track record of the company is truly terrible. After IPO’ing in 2006 for $4.90/share the stock saw more than 99% of its value evaporate. Since 2015 the stock has been able to recover a bit from a low of $0.03/share to the current price of $0.39/share. The reason for the big recovery is that Tejoori started selling all its assets and last week the company announced that it has signed an agreement to sell its last remaining asset (a plot of land in Dubai) for a gross consideration of US$5.8 million. Last year the company managed to sell two other plots that generated most of the cash that the company now has on hand. Assuming that the sale of the final plot goes through without problems the balance sheet of Tejoori looks as follows:

As you can see, the company has only cash remaining on the balance sheet together with some receivables and some small liabilities. The “other receivables” are related to an earlier sale of some assets, but apparently the acquirer has so far been unwilling to settle the remaining amount. I have applied a 50% haircut to account for this, but being a bit more conservative might also be warranted. The receivable is related to a sale in 2013, so it’s long overdue:

During the year ended 30 June 2013, the Group successfully replaced the Lagoons plots for alternative plots in the Arjan project located in Dubai, UAE. USD 0.6 million of the additional costs incurred on the exchange of plots was payable by the acquirer which has been added to the earlier receivable of USD 3.1 million. However, the acquirer has refused to settle the balance due to the Group. While the negotiations are ongoing to settle the dispute, no impairment has been recognised.

While the company has at this moment basically sold all its assets the big question mark is: will it actually fully liquidate. Tejoori has communicated its desire to return a part of the cash, and given its current small size I don’t see the point of trying to remain in business. In the latest annual report the company wrote the following:

The Company intends to, as previously stated, return to shareholders a certain proportion of the cash generated from the sale of the plots undertaken to date and it intends to finalise these details following the sale of the third Arjan Plot.

The Company is, in conjunction with its advisers, considering the most effective and efficient manner in which to return cash to shareholders and following the disposal of the third plot the Company will update shareholders further. The Company is also, as part of this review process, evaluating the merits of the Company maintaining remaining as an AIM quoted company given the costs associated with the listing.

I expect that the company will fully liquidate after selling the last land plot earlier this year, but it might take some time since they first need to settle the unpaid receivable and if legal steps needs to be taken that might potentially take significant time and money. But I expect that a large part of the money can be and will be returned to shareholders already this year. But since the company hasn’t fully committed to a full liquidation this remains a bit uncertain.

One thing that is positive is the current operating costs of the company aren’t that high. Last year administrative and other operating expenses were $177,500. Presumably this amount could be lowered significantly if the company decides to delist from the AIM. But with ~$18 million in equity and a ~$10 million market cap there is I think a sufficient margin of error. A few years of operating expenses isn’t going to destroy all potential upside.

Conclusion

As a holding company holding only cash (when the last transaction is completed) this is a very simple situation. If you think that this cash will most likely be returned to shareholders you have a great deal, if you think the company will find a new way to light money on fire it’s not attractive. Given what Tejoori has done the last year, and what they have communicated I think it’s very likely that they are going to continue to do the right thing. At the same time, this isn’t a super high conviction idea and since trading costs are also very high on the AIM market I made this a small position. I think it’s still a pretty good addition to my basket of special situations.

Disclosure

Author is long Tejoori Limited

40 thoughts on “Tejoori Limited: liquidating with a 40% discount to NAV?”

  1. Brent

    Hey AlphaVulture,

    Firstly, this is an interesting find. How did you come across it? I find it very hard to screen for AIM stocks, did you use a stock screener, if so, could you share please?

    Secondly, How come it didn’t flag up when it was trading at 0.03?! Why was it even trading this low for a year! That’s crazy, it would have been <1M market cap. With 7 x that cash on the Balance sheet….Please tell.

    Reply ↓
    1. Alpha Vulture Post author

      Someone recently mentioned the company to me 🙂 And when it was trading at $0.03 the company didn’t have any cash, just some assets that investors obviously ascribed little value to. But yes, would have been (in hindsight at least) an awesome deal at that price.

      Reply ↓
      1. Brent

        Thanks for replying.

        How do you go about screening and researching UK Aim stocks though? The few I’ve ever come across don’t put quarterly reports on their website…Are they legally required to over there?

        Reply ↓
        1. Alpha Vulture Post author

          I think they are all required to post information on their website, never seen a company without info. In addition, everything is posted on londonstockexchange.com

          Reply ↓
  2. Tom Sandlow

    Alpha V,

    Thanks for the idea. It probably makes sense to write off the full receivable. Even so, it’s still a 50% return which I think is worth looking into.

    Reply ↓
  3. Wachtwoord

    Very interesting and nice find!

    How are you buying this? It looks like Interactive Brokers doesn’t support it, which is weird cause it offers other companies traded on the LSE.

    Reply ↓
        1. Alpha Vulture Post author

          True, what I should have said is: IB doesn’t support stocks that are traded using the SEAQ trading service (no electronic order book, just market makers). A lot of AIM stocsk are SEAQ stocks, but not all.

          Reply ↓
  4. CMBuff

    How are you accounting for Wakala deposits? Shouldn’t the cash liquidation value be simply Cash + bank balances less liabilities/Shares outstanding. I do not think equity holders would receive the Wakala deposit. The discount is still juicy at ~32.50% but something to consider.

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  8. mick

    “As previously announced the Company intends to return to shareholders a certain proportion of the cash generated from the sale of the Arjan Plots and is considering, in conjunction with its advisers, the most effective and efficient manner in which to return to cash to shareholders. As part of this exercise the Company is also continuing to evaluate the merits of remaining on AIM. Further updates will be made by the Company at the appropriate time.”

    The most straightforward conclusion is that they will delist soon, but after returning only some (“certain proportion”) of the capital to shareholders. looks dodgy to me, i’m out.

    Reply ↓
    2. Vincent

      For an orderly delisting from the AIM a 75% shareholder approval is required (http://www.londonstockexchange.com/companies-and-advisors/aim/advisers/aim-notices/aimrulesforcompaniesjan16.pdf rule#41). So the risk of them just going dark with a lot of money remaining on the balance sheet is not high in my opinion. Only if they just stop complying to the rules of being on the AIM it could be that they are suspended from trading and then delisted after six months.
      Also 84% of shares is held by minority shareholders in public hands, so the majority is aligned with our interest.

      Reply ↓
  9. woyzeck

    I can’t locate Tejoori shares through Interactive Brokers, Binck nor ING. Through what broker where you able to allocate?

    Reply ↓
  10. Kp

    Anyone seen the 0.37c tender offer for all of Tejoori from Southey Capital Ltd?

    Have tendered a single share as a polite F off…

    Reply ↓
  11. Tom

    Kp,

    Could you provide a link regarding the tender from Southey Capital? I haven’t been able to track it down on Tejoori or Southey’s websites (and Southey’s website includes a list of tenders that they are making).

    Thanks,

    Tom

    Reply ↓
  14. Eric G

    Any ideas why the spread remains so large when the time to eventual liquidation appears to be quite short?
    The only thing I can think of is that there is a risk 75% approval is not reached during the meeting if too few shareholders participate and management votes against it. But at the same time liquidation seems to be in everyone’s interest (including management’s), so this vote down seems kind of unlikely.
    Any other reasons for the spread to exists?

    Reply ↓
    1. Alpha Vulture Post author

      The thing is, how do you calculate the spread? They haven’t given any information about how many liabilities are remaining on the balance sheet, and how many costs will be incurred to liquidate. Additionally, they are planning to cancel their CREST facility before making the liquidation distribution, so not sure how that is going to work out… might be messy.

      Reply ↓
  15. Dan

    I wonder if the $17.6m cash to be distributed is net after outstanding liabilities shown on the recent balance sheet have been deducted

    Reply ↓
    1. Alpha Vulture Post author

      That’s the 1.6 million dollar question 😉 But based on the current cash balance I would guess that most of the liabilities have been paid off, although probably some are remaining.

      Reply ↓
  16. Dan

    Somebody on another board said “spoke to the company and the final NAV will be about the value of the cash less liquidation costs so c$0.63 – all debt has been paid.”

    Reply ↓

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