Tag Archives: RHDGF

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.


Author is long Retail Holdings

Retail Holdings sells Singer Thailand stake

Retail Holdings is one of my biggest positions, and as usual the thesis is pretty simple: the company is trading at a large discount to the public market value of its various holdings while there is a catalyst on the horizon since the company is trying to liquidate. The company is taking its time to do that, but today they finally announced that one of its biggest positions has been sold. The stake was sold on the public market, an exit route that the company doesn’t envision as possible for their other stakes since they own large majority positions in the other subsidiaries. What the company will do with the cash is undecided at the moment. I would expect a big dividend since that is what they have done historically, but there are other options:

“No decision has yet been made as to the use of proceeds, which may include a distribution to shareholders (in addition to the $1.00 per Share previously suggested), share repurchases, and/or purchases of portions or all of some of the minority stakes in the Company’s continuing subsidiaries.”

The market reacted positive on the news, but despite that fact the discount to NAV is still slightly bigger than when I first initiated my position almost a year ago:RHDGF NAV June 2015


Author is long Retail Holdings

Annual results: Conduril, Ming Fai, Retail Holdings & Rella

The last week of March was a busy month with several of my portfolio companies releasing their results for 2014. My biggest position is Conduril, and they released their results for 2014 yesterday. As usual the annual report is at the moment only available in Portuguese, the translated English version should follow in a couple of weeks.


Conduril’s performance for 2014 was satisfactory, but there are a couple of clouds in the sky. Their backlog dropped from €750 million at the end of 2013 to just €450 million at the end of 2014, one of the lowest levels in years. Generating free cash flow also proved a problem in 2014. This wasn’t exactly a surprise since the company announced in their interim report that the Angolan government settled a large outstanding receivable with certificates of public debt. But even when we ignore this item we see that working capital is growing while revenues have been shrinking the past years. The good news is that the company announced that it will pay a €2/share dividend this year and that it is still dirt cheap. It’s trading at a P/E ratio of just 4.2x and of P/B ratio of just 0.6x which is a small discount to NCAV.

An updated summary of their financial performance for the past six years is provided in the table below. A large part of the positive differential between other income and other expenses is caused by foreign exchange gains. Probably repeatable for 2015 given the decline of the euro this year, but of course not sustainable in the long-term:

Historical results Conduril (2014 AR update)

Ming Fai International Holdings

Ming Fai also reported results for 2014. My thesis for the company is based on the fact that the profitability of their core business is ‘hidden’ by two loss-making divisions, but since one of these divisions has been shut down mid-2014 I expected that reported results would soon improve. Reported net income did indeed jump by 67% in 2014 while the dividend was also increased by 29%. While this is, of course, good news there was also some bad news buried in the financials. The profitability of their crown jewel, the amenity segment, decreased while losses in the retail segment only got bigger:

Segment details Ming Fai (2014AR update)

Retail Holdings

Retail Holdings also reported their 2014 results yesterday. Results for 2014 weren’t particularly impressive, but the company continues to trade at a 40% discount to NAV, announced another $1/share dividend while the long-term strategy is still to monetize the value of its assets. It’s for sure taking a long time, but we get paid to wait and intrinsic value can grow in the meantime. The chairman of the company is pretty optimistic:

I remain optimistic about 2015 and later years. I anticipate a marked improvement in Sri Lanka’s performance, reflecting accelerating economic growth, helped by lower oil prices, an improving agriculture picture, an increase in government salaries, and an uptick in consumer confidence, as well as the launch of a major new financial services initiative. In Bangladesh, a lot will depend on political developments, but the Company’s performance should improve in any case, particularly in the second half of the year, as the Company’s new refrigerator factory begins production, and other improvements now under way impact results. Pakistan and Thailand’s performance should also improve as new initiatives impact results. I expect India to continue to grow strongly. Revenue and profits in 2015 and later years will also benefit from the rollout of the new Cambodian business and from the Company’s ongoing investment in new and renovated shops and in new products, brands and services.

The holding company currently consists of the following assets:

Retail Holdings NAV (2014AR update)

What I also found interesting was the following paragraph in the annual report:

During 2014, the Company returned to equity $49,000 of the 2009 distribution, representing unclaimed distributions of non U.S. shareholders; an additional $13,000 was escheated. During 2013, the Company returned to equity $175,000 of the 2008 distribution, representing unclaimed distributions of non U.S. shareholders; an additional $3,000 was escheated.

I’m not familiar with the relevant laws in the US. I’m wondering if shareholders that don’t claim their dividends lose the right to receive them after 5 years? And what will happen if the company eventually liquidates? It appears that approximately 5% of dividends go unclaimed, and if this eventually accrues to other shareholders it could be a nice bonus?

Rella Holding

Since Rella announced that they would sell their stake in Aller and liquidate it doesn’t really matter what the latest results are. Despite that fact, the annual report did contain a couple of interesting items. The company increased the estimated liquidation proceeds from 77DKK/share to 77.5DKK/share. What I also found noteworthy is that the company renewed their share repurchase authorization. I don’t know if they are going to use it, but it would allow Rella to bet on its own liquidation. Could generate a bit of value for remaining shareholders.


Long Conduril, Ming Fai and Retail Holdings. No position in Rella anymore.

Bought Retail Holdings NV (RHDGF)

Retail Holdings (RHDGF) is a well known stock in value circles with a simple story, and because of that I’m going to keep this post short. The company owns a majority stake in Sewko Holdings that has operating subsidiaries in Sri Lanka, Thailand, India, Pakistan and Bangladesh (selling home appliances, consumer electronics, sewing machines and other products). Because these operating subsidiaries are all publicly listed the value of Sewko Holdings can easily be determined. Besides the publicly listed companies there is also some net cash at the various holding companies and a note receivable:

Retail Holdings NV NAV

As you can see the company is trading at a sizable discount, and the good news is that there is a catalyst on the (far) horizon for this discount to close since the company wants to liquidate, but only at a good price. Last year Retail Holdings wanted to do an IPO in Singapore, but this plan was shelved because it didn’t think it could realize fair value. In the mean time Retail Holdings pays out generous dividends and with the CEO and his wife owning 25.7% of the company I’m confident that they will try to maximize shareholder value.

There is a lot more that can be said about Retail Holdings but since not a whole lot has changed the past years I recommend you check out these posts on OTC Adventures (post 1, post 2 and post 3) and this post from WertArt Capital. Note that the discount that the author of the WertArt Capital blog applies to account for the license fee that Retail Holdings pays for the use of the Singer trademark is not appropriate. The operating subsidiaries also pay royalties to the parent company to use the trademark so this is already reflected in the market value of the various operating companies. It might actually have a small positive value since Retail Holdings has also licensed the trademark to a couple unrelated companies operating in Malaysia and Australia.


Author is long Retail Holdings NV