Tag Archives: RHDGF

Retail Holdings announces sale of Singer Bangladesh

Retail Holdings announced today that a 54.1% owned subsidiary has entered into an agreement to sell their whole stake in Singer Bangladesh for $75 million. Given that Singer Bangladesh is the largest remaining piece of Retail Holdings assets this gets the company pretty close to the finish line with regards to their plan to fully liquidate. Besides Singer Bangladesh they only have a 60.8% stake in Singer India left that is also owned indirectly through the same subsidiary.

While the sale of Singer Bangladesh is nice, the price is very disappointing. Retail Holdings owns (indirectly) a 37% stake of Singer Bangladesh that is worth $91 million based on the latest market price in Bangladesh. Besides this stake, they also own a 20% stake consisting of non-remittance shares and these shares have $15 million in accumulated unremitted dividend distributions. Given the restrictions these shares have with regards to paying distributions to shareholders outside Bangladesh it makes sense that these are worth substantially less than normal shares, but I think they should certainly be worth something. Selling their whole Singer Bangladesh stake for a discount to the latest market price and throwing in the non-remittance shares and their accumulated unremitted dividend distributions for free seems a pretty bad deal. In a best case scenario, with a zero percentage discount, these assets could be worth $155 million, more than twice the agreed upon price of $75 million.

Despite the bad deal the stock is up a tiny bit today, which makes sense. Most of Retail Holdings market cap will soon consist of cash, and presumably be returned to shareholders. Taking into account the $75 million that will be received for their Singer Bangladesh stake, NAV/share stands roughly at $12.40 which means that there is actually a little bit of upside left from today’s share price of $11.66. Guess that shows that buying stuff with a sufficiently big discount does offer some margin of safety, but still: I’m pretty disappointed by this outcome.


Author is long Retail Holdings

Exited Retail Holdings, this time for real

Earlier this month I sold Retail Holdings, only to quickly buy it back after I realized there was a mistake in my sheet. Since then the price of the company has increased a bit more than 6% while the underlying asset value actually declined a tiny bit. Since the discount earlier this month was just 12.7% (using a 33% discount on the non-remittance shares) these relative small movements are enough to change the story. At the moment the remaining discount is 6.01% which translates to 10.1% after the dividends have been paid. Given that there are for sure some costs at the holding company level, and that it quite possible that a fair discount on the non-remittance shares is actually higher than 33% I sold my position. There might be a bit of upside left (especially if this Seeking Alpha author is right with respects to the licence fees), but I think the Retail Holdings story has mostly played out at this point in time.

I bought my initial position a bit more than three years ago. Taking into account the dividends paid out in the meantime I generated a more than solid internal rate of return of 20.2%:

 Description Date Cash flow
Buy 6/4/2014 -18.95
Dividend 10/6/2014 1.00
Dividend 10/6/2015 1.00
Dividend 4/13/2016 5.00
Dividend 5/17/2017 2.00
Sell 10/13/2017 23.24
IRR: 20.21%


Author has no position in Retail Holdings anymore

Exited Retail Holdings (updated)

Some readers might have noticed that I briefly published a post about selling Retail Holdings yesterday. One reader quickly noticed that there was a pretty big mistake in my sheet (note to self: maybe don’t update sheets and trade while on the train…) which does change the story a bit. I thought that a discount of 33% on the non-remittance shares would mean that there was almost no upside left in Retail Holdings, while in fact the discount is still 21.1% (pro-forma for the $10 in dividends that will be paid in the coming months). It is tempting to rationalize your previous selling decision and find a new reason to support the move, but a mistake warrants a fresh evaluation. While the discount isn’t particularly big I think I’m happy to continue owning a (smallish) position. So I decided to correct my mistake of yesterday, and I rebought today.

I still think that it was a disappointing development that the company sold their SVP notes for a nominal amount last month. They had been written down in the past to zero already, but with a face value of $32.7 million it provided a nice bit of optionality that is now definitively gone.


Author is long Retail Holdings

Retail Holdings sells majority stake in Singer Sri Lanka

Retail Holdings announced today that they have sold 61.7% of their stake in Singer Sri Lanka for a total consideration of $69.0 million. Because the stock was owned through Sewko Holdings in which the company has a 54.1% stake the consideration attributable to Retail Holdings shareholders will be $37.3 million. This is pretty significant news since Singer Sri Lanka was one of the last remaining big position besides Singer Bangladesh. According to the press release Retail Holdings hasn’t yet determined what the cash will be used for, but based on their history of paying out (large) dividends another one of those is a safe bet. With 4.65 million shares outstanding the $37.3 million payment would enable a dividend of a little more than $8/share, in addition to the $1 dividend that already has been announced for November.

For some reason the company didn’t sell their whole stake in Singer Sri Lanka, but they are keeping a 9.5% stake with the option to sell it to the acquiring party within 12 to 15 months. I have no idea why they have structured the transaction in such a way, but my guess is that it has to do with taxes or other rules that make disposing of the whole stake in one go less attractive. Following the transaction the acquiring party is obligated to launch a tender offer for all shares so presumably they want to acquire everything, while Retail Holdings wants to exit. No reason to think that the remaining position won’t be sold in the time frame of the option.

While Retail Holdings is up a bit based on this news I think the stock is still cheap. It is currently trading at a discount of 25% to underlying asset value, which is not that huge, but if you take into account that shareholders will most likely receive $9/share in dividends the discount on the remaining holdings rises to 37%.


Author is long Retail Holdings

Retail Holdings making progress with liquidating

Retail Holdings announced yesterday their results for 2016.  That these would be good was already known since the individual subsidiaries had already reported their 2016 results. But it’s nevertheless good to see it confirmed that revenue was up 16.9% in US dollars while operating earnings increased by 26.0%. Bigger news is that apparently the liquidation of the company is well on track. A $2/share dividend will be paid in the coming months while a second distribution is expected later this year, depending on how much assets the company will sell in the meantime. Apparently Retail Holdings has already started to liquidate their stakes in the last three remaining operating subsidiaries (emphasis mine):

“I am optimistic about the prospects for 2017, in terms of both financial performance – – the individual operations are all off to a very good start – – and likely further progress in our strategic divestment program. Public market sales of additional shares are either already underway or planned in Bangladesh, India and Sri Lanka; the initial results from this effort should be disclosed in the next several weeks. Additional asset sales are planned for later in the year.

So the company has finally decided on a course of action, and it will try to sell their stakes in the public market. With Retail Holdings owning a 72.8% stake in Singer Bangladesh, a 75.0% stake in Singer India and a 79.7% stake in Singer Sri Lanka this will take time. Presumably they will also not sell everything at once, but I’m guessing that in twelve months time Retail Holdings will look very different than from today.

This NAV calculation is still using some stale numbers since the 2016 annual report hasn’t yet been published (should be coming in the next few days). Most likely there is now a bit more cash at the ReHo holding company level (they are planning to pay a ~$9 million dividend after all), but since the majority of the value sits inside the three publicly traded subsidiaries it should still be reasonable accurate. Given the imminent liquidation of the company I think a ~35% discount is quite attractive, and I added a bit to my position at the market open.


Author is long Retail Holdings