Retail Holdings – RHDGF
Retail Holdings NV is a holding company with a fully-diluted 54.1% stake in Singer Asia, a consumer goods conglomerate operating in South-East Asia. Singer Asia’s various subsidiaries are publicly-traded, making it simple to determine their value to Singer Asia and ultimately to Retail Holdings.
Retail Holdings’ objective is to liquidate, selling its investment in Singer Asia and returning cash to shareholders. Recently, the company announced it is considering an IPO of Singer Asia, renaming the company Sewko Holdings Limited. Retail Holdings would retain an equity stake in the company. The company’s chairman, Stephen H. Goodman, cautioned investors that the IPO might not happen for some time, if ever. Despite the uncertainty, the fact that the company is considering monetizing its main asset is a positive for investors.
A sale of most of Retail Holdings’ stake in Singer Asia would go a long way toward closing the significant gap between Retail Holdings’ trading price and the market value of its assets.
Singer Asia’s various subsidiaries have a market capitalization of $464 million USD, of which $146.53 million is attributable to Retail Holdings, or $27.59 per share. Retail Holdings also holds $4.24 per share in distressed debt, as well as some cash at the holding company level. Even haircutting the debt by 50% and excluding the holdco cash gives a per share net asset value of $29.71. The closing price of $19.60 represents a 34% discount. An IPO or other strategic transaction could close this gap, yielding a big gain for shareholders.
Awilco Drilling -AWLCF
Awilco Drilling owns two semi-submersible drillships that are contracted to oil companies drilling in the North Sea. Despite good revenue visibility and a management team committed to returning capital to shareholders, Awilco trades at a dividend yield of over 20%. One factor that may be holding down Awilco’s shares is persistent rumors that Awilco will contract for newbuild drillships. Awilco’s investor relations denied these rumors last time they came up, but that does not mean the story could not change. Ordering new rigs would obviously impair Awilco’s ability to pay dividends and would be reason for reviewing the entire investment thesis. A link to Awilco’s denial is here, but in Norwegian.
Yesterday Awilco announced the signing of a letter of intent with Apache and Taqa for Awilco’s WilPhoenix drillship. The contract will commence in the second half of 2014 and will employ WilPhoenix through mid-2017, with an option for two years of additional service.
The dayrate for the new contract is about $387,000, 22.9% higher than the current contract. With the signing of the letter of intent, both of Awilco’s drillships are fully booked for the next 29 months. Assuming a 10% marginal tax rate and that the company can maintain 90% revenue efficiency, the revenue increase from the new contract will contribute an additional 71 cents per share to Awilco’s bottom line each year once the contract begins.
I own shares in Retail Holdings NV and Awilco Drilling Plc.