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Sunday, November 16

Lazy Cheap Assets Purchased in the Tradition of Ben Graham’s Net Net Mean Reverting Thesis


Assets by definition are economic transactions with probable future economic benefits. These assets are reported at historical cost, not fair market value. My efforts for this post, uncover deeply discounted cheap corporate assets for its "probable future economic benefits". The Financial Accounting Standards Board (FASB),defines assets as probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.

The process takes many twists and turns.So a pool of +10,000 stocks was reduced by multiple financial hurdles. For example it only included stocks with  Z scores over 2.99 and M Scores less than -2.22.This was to lessen the chance of near term bankruptcy caused by weak financials(Z score/Altman) and aggressive accrual accounting (M Score/ Beneish). Additional financial hurdles were included to improve potential mean reverting price behavior. Such as poor historical price returns, reduction of share count, debt reduction and other measures to be discussed.   

Enterprise value to non cash assets (EV/Noncash Assets) was empahsized.The thought with using EV/Noncash Assets, uncover ignored deep discounted bargain priced corporate assets further supported by other mean reverting and margin of safety attributes.

For this post when not indicated, 

Enterprise value(EV)= market capitalization + total liabilities (short and long term) - cash.

Non Cash Assets = total assets (tangible and intangible) - cash 
  
This post will continue to be updated over time to provide deeper analysis, ideas and investment thoughts. I wanted to start the post today.

Discoveries;


For tonight I want to break the EV/Total non cash assets discovery process into 4 categories.
1) High ranking EV/Total non cash asset companies reporting profits.2)Outsized capital expenditures reported on the cash flow statement over the past 5 quarterly periods 3)Negative enterprise value below liquidation value 4)Negative enterprise value reporting profits 

All 4 categories are supported by strong financial position, clean share holder friendly capital structure and below market stock price returns for multiple periods.


Tonight the ideas below contain little or no details but will be updated. 




Negative enterprise value selling below current liquidation value:

Phoscan Chemical (PCCLF) : Candian symbol(FOS.TO)

Price = .25, Cash per share = .31, Book value per share = .77

Karnalyte Resources(KRLTF): Canadian symbol (KRN.TO)
Price = .76, Cash per share = 1.27, Book value per share = 3.18


Profitable Negative Enterprise Value:

Emerson Radio Corp(MSN):
Gencor Industries(GENC):
Balda AG (BALOF):
Automodular (AMZKF):
Ambassadors Group(EPAX): 

Click for quotes on the above 5 ideas


Enterprise value calculation for these 5 stocks include long term debt but exclude short term liabilities. 






























Outsized capital expenditures reported on the cash flow statement over the past 5 quarterly periods relative to enterprise value:


TransGlobe Energy Corporation (TGA): 142.1M in total capital expenditures over the last 5 quarterly periods. 142.1M in capital expenditures compares favorably to the current enterprise value of 387.55M. Current enterprise value calculated with a market capitalization = 297.86M, Cash = 77.94M, total liabilities = 167,639,000 or 5.19 EV per share.Total EV/CE over the prior 5 periods is 5.19/1.90= 2.73


Codan Limited (CODAF):


Mitcham Industries. (MIND):


High ranking EV/Total non cash asset companies reporting profits:

ITEX: ITEX Corp Corp is engaged in the business of battering. For over 30 years ITEX has created a distribution channel for business to exchange services or goods with battering to preserve cash flow. Members utilize digital currency (ITEX dollars) to exchange goods and services rather than use cash.


Total non cash assets = 9,698,000 or 3.71 per share. EV/Non cash assets = 1.98/3.71 =.5336

The market capitalization is 7,410,000 (11/14/14) with an enterprise value of 3,737,000 using only non current liabilities. But for my analysis using EV/Noncash Assets I include all liabilities, current liabilities (1,442,000) and zero non current liabilities to derive an enterprise value of 5,179,000.

This high yielding nano capitalization has aggressively distributed returns to shareholders in the form of a high dividend and share buybacks.


Free cash flow for the TTM was 1,204,000 or .46 per share. The next 5 quarters starting 07/2013 to 07/2012 FCF was 2,989,000 or 1.14 per share. Shares outstanding are 2,614,000 for the MRQ. The MRQ share count was reduced from 3,604,000 for the period ending 07/2011. This was a 38% reduction of shares outstanding from 07/2011. Furthermore, a consistent quarterly .05 per share  dividend was distributed since 06/2013, .04 quarterly dividends from 12/2010.

Market Cap: 7.41M, Enterprise Value:  3.75M
Price/Sales (ttm):  0.55 , Price/Book (mrq):  0.62
Enterprise Value/Revenue:0.28 
Enterprise Value/EBITDA (ttm): 3.87
Revenue(ttm):13.54M ,Revenue Per Share (ttm):5.18
Qtrly Revenue Growth (yoy):  -12.90% 
Gross Profit (ttm):  5.23M, EBITDA (ttm):  968.00K
Total Cash (mrq):  3.67M , Total Cash Per Share (mrq): 1.41
Current Ratio (mrq): 3.70 , Book Value Per Share (mrq): 4.59
52-Week Change:  -26.17%
52-Week High: 5.10 , 52-Week Low: 2.65
Shares Outstanding:   2.60M , Float:  1.68M
% Held by Insiders:  47.18%

Trailing Annual Dividend Yield: 7.00%


Highway Holdings Limited (HIHO)


Trans World Entertainment Corporation (TWMC)

IEH Corporation (IEHC)


Sunday, November 2

Mean Reverting Candidates, Financially Strong


“ The stock of high quality companies is driven so high that long-term returns are impaired even assuming the high rates of growth and profitability persist. The corollary is also true: A company with an apparently poor business will generate an excellent return if the market price underestimates its fair value even assuming the low growth or profitability persists. These findings reveal an axiomatic truth about investing: investors aren’t rewarded for picking winners; they’re rewarded for uncovering mispricings—divergences between the price of a security and its intrinsic value. It is mispricings that create market-beating opportunities. And the place to look for mispricings is in disaster, among the unloved, the ignored, the neglected, the shunned, and the feared— the losers. This is the focus of the book.” Source  Deep Value: Tobias E.Carlisle


All the stock below have a negative 3 year stock price return coupled with a significant improvement in valuation using enterprise value to total noncurrent assets from the MRQ to the 2012 fiscal year end valuation EV/Total NonCurrent Assets. Share count reduction from 2012 to the MRQ with only 1 exception reporting a stable share count. Furthermore, all ideas have an EV/EBIT under 9. Note the other valuation improvements for P/TB or EV/Revenue. 
































































Enterprise value / Non Cash asset valuation has significantly improved from 2012 to the most recent quarter. Additional AVERAGES for the group; EV/EBIT = 7.24, YTD return = -23.83%, 3 year return = -11.29%, Z score 9.34. 



Coach, Inc. (COH) : Post date price = $34.88, 
Price on 11/27 = $36.66, % change = 6.63%


“Coach, Inc. (Coach) is a marketer of accessories and gifts for women and men. The Company offers a range of modern, fashionable handbags and accessories. Its product offerings include women’s and men’s bags, accessories, footwear, wearables, jewelry, travel bags, sunwear, watches and fragrance.” Source Google Finance 


CARBO Ceramics Inc. (CRR):  Post date price = $51.67
Price on 11/27 = $45.76


“Carbo Ceramics Inc is a supplier of ceramic proppant. It provides fracture simulation software, fracture design, engineering and consulting services and a broad range of technologies for spill prevention, containment and countermeasures”. Source Morningstar



Trading at a historical discount for valuation on price to book and revenues.

Mean reverting attributes, 52 week change = -58.94%, 3 Year return = -25.98, 
5 Year return of -.58%

Industry:Oil and Gas Equipment Services

Market Cap: 1.16B , Enterprise Value:   1.16B
Price/Book (mrq): 1.51
Enterprise Value/Revenue:  1.79 , Enterprise Value/EBITDA: 7.02
Profit Margin:  11.79% , Operating Margin : 18.07%
Revenue (ttm):  645.05M ,  Revenue Per Share (ttm):  28.11
Qtrly Revenue Growth (yoy): -22.90%
Gross Profit (ttm): 193.00M , EBITDA (ttm):  164.57M
Total Cash (mrq):   30.10M , Total Cash Per Share (mrq):   1.31
Total Debt (mrq):   0.00 , Current Ratio (mrq):    4.50
Book Value Per Share (mrq):  34.19
52-Week Change:   -58.94%
52-Week High(Jul 1, 2014): 156.00 , 52-Week Low (Oct 30, 2014): 47.01
% Held by Insiders: 14.58% , % Held by Institutions:   92.90%
Short % of Float (as of Oct 15, 2014): 24.00%
Trailing Annual Dividend Yield:   2.40% , 5 Year Average Dividend Yield: 1.00%



Computer Task Group Inc. (CTG): Post date price = $8.80
Price on 11/27 = $9.49, % change = 7.84%


“Computer Task Group, Inc., is an IT solutions and staffing services company with operations in North America and Europe. The Company's geographical area of operation includes North America and Europe.” Source Morningstar

Vaalco Energy Inc. (EGY):  Post date price = $7.42
Price on 11/27 = $6.27


VAALCO Energy Inc is an independent energy company, which is engaged in the acquisition, exploration, development and production of crude oil and natural gas.” Source Morningstar

ENGlobal Corp. (ENG):  Post date price = $1.31
Price on 11/27 = $2.65, % change = 102.29%


“ENGlobal Corp is a provider of engineering and other professional project services related to design, fabrication, procurement, maintenance, environmental and other governmental compliance and construction management”. Source Morningstar



EngGlobal aggressively reduced their long term debt from a 12/2009 long term debt balance of 6,149.000 to zero for the most recent quarter. Strong financial position with a F score of 8.

Market Cap = 56.89M, Enterprise Value = 39.66M, EV/EBITDA =6.33

Geospace Technologies Corporation (GEOS)
Post date price = $30.79
Price on 11/27 = $28.27


“Geospace Technologies Corp designs and manufactures instruments and equipment used by the oil and gas industry in the acquisition and processing of seismic data as well as in reservoir characterization and monitoring activities. Source Morningstar

Guess' Inc. (GES):  Post date price = $22.17
Price on 11/27 = $22.54


“Guess?, Inc. (GUESS?) designs, markets, distributes and licenses apparel and accessories for men, women and children.” Source Morningstar

Lifevantage Corporation (LFVN) : Post date price = $1.35
Price on 11/27 = $1.39

Lifevantage Corp is engaged in the identification, research, development and distribution of nutraceutical dietary supplements and skin care products including Protandim, TrueScience and Canine Health.Source Morningstar. Think of multilevel marketing. 


Aggressive recent share count reduction, the share count was reduced from 114,666,000 shares outstanding for the period ending 09/2013 by 11.40% to the MRQ of 101,594,000. The per share price change was -39.83% for the prior 52 week period. 
Note there was a large assumption of long term debt over that same period. 

National Presto Industries Inc. (NPK): Post date price = $63.06
Price on 11/27 = $59.70


“National Presto Industries operates in three business segments such as Housewares/Small Appliances, Defense Products & Absorbent Products. Its products include pressure cookers, kitchen electrics, precision mechanical & adult incontinence, among others.” Source Morningstar


North European Oil Royalty Trust (NRT) : Post date price = $18.29
Price on 11/27 = $15.61


“North European Oil Royalty Trust holds overriding royalty rights covering gas and oil production in certain concessions or leases in the Federal Republic of Germany” Source Morningstar

RPX Corporation (RPXC) : Post date price = $14.05
Price on 11/27 = $13.48


“RPX Corp. provides a subscription-based patent risk management solution that facilitates more efficient exchanges of value between owners and users of patents compared to transactions driven by actual or threatened litigation.” Source Morningstar

Tengasco Inc. (TGC):  Post date price = $.43
Price on 11/27 = $.42


“Tengasco, Inc.,is engaged in the business of exploration for and production of oil and natural gas. Its area of oil exploration and production is in Kansas. Its gas production area is the Swan Creek field in Tennesse.” Source Moringstar


No position in the stocks listed above

Wednesday, October 29

Avg 2014 Net Insider Purchase Price > Current Price and EV/EBIT < 10

The post will be updated tomorrow 10/31/14, it may still contain interest. Today 10/31/14 I added at the bottom a self service table.I will add analysis tomorrow. 

Investors may find this filter useful to start additional analysis.  The aggregate average transaction price for insider sales and purchases for YTD 2014 were calculated. This was completed for over 9,000 companies on all US domestic exchanges, NYSE, NASDAQ, AMEX, OTC, and OTCBB.
The list was reduced by eliminating companies showing only options, dispositions, grants or sales greater than purchase activity. Further,  if the aggregate average 2014 net insider transaction prices was less than the current price they were excluded. Only stocks with 2014 aggregate average insider transaction price greater than the current stock price were selected. Lastly those remaining were selected after jumping an additional hurdle of EV/EBIT value less than 10.

The list introduced has 37 companies. Broken down by sector, Financial = 20, Services = 6, Basic Material = 4, Technology = 2, Conglomerates =1, Consumer Goods = 1, Healthcare = 1, Industrial Goods = 1, N/A =1




























Sector
Industry Company Symbol 
Basic Materials Oil & Gas Drilling Noble Corp PLC NE
Oil & Gas E&P Tengasco Inc TGC
Oil & Gas Equipment & Services Carbo Ceramics Inc CRR
Oil & Gas Refining & Marketing Renewable Energy Group Inc REGI
Conglomerates Staffing & Outsourcing Services Compass Diversified Holdings CODI
Consumer Goods Household & Personal Products Nutraceutical International Corp NUTR
Financial SWK Holdings Corp SWKH
Asset Management Calamos Asset Management Inc CLMS
Banks - Regional - US Auburn National Bancorp Inc AUBN
Bank of South Carolina Corp BKSC
First Bancorp FBNC
First Mid Illinois Bancshares FMBH
First National Corp FXNC
First West Virginia Bancorp FWV
Hudson Valley Holding Corp HVB
MBT Financial Corp MBTF
National Bankshares Inc NKSH
Peapack Gladstone Financial Corp PGC
Plumas Bancorp PLBC
Suffolk Bancorp SUBK
Two River Bancorp TRCB
Insurance - Life First Acceptance Corp FAC
Insurance - Property & Casualty United Insurance Holdings Corp UIHC
Oil & Gas Equipment & Services North European Oil Royalty Trust NRT
REIT - Diversified Bimini Capital Management Inc BMNM
Savings & Cooperative Banks Riverview Bancorp Inc RVSB
Healthcare Household & Personal Products Natures Sunshine Products Inc NATR
Industrial Goods Tools & Accessories P & F Industries Inc PFIN
N/A Household & Personal Products Natural Health Trends Corp NHTC
Services (null) Command Center Inc CCNI
Education & Training Services National American University Holdings Inc NAUH
Engineering & Construction ENGlobal Corp ENG
Oil & Gas Equipment & Services PHI Inc PHII
Resorts & Casinos Nevada Gold & Casinos Inc UWN
Specialty Retail Trans World Entertainment Corp TWMC
Technology Communication Equipment Aware Inc AWRE
Internet Content & Information Blucora Inc BCOR




Self service by selecting or deselecting fields needed along with field sorting functionality.






“Aware, Inc., provides software and services to the biometrics industry. Its products are used in government and commercial biometrics systems, which are capable of determining or verifying an individual's identity.” Morningstar Source

Aware, Inc. Reports Third Quarter 2014 Financial Results
“Rick Moberg, Aware's co-chief executive officer and chief financial officer, said, "We were able to close some significant opportunities which led to a good quarter in terms of revenue and profitability.  Because of the nature of our business, and at the request of most of our customers, we are generally prohibited from referencing specific projects and customers by name. 
In addition to closing these transactions, we saw two other positive signs this quarter. We began to derive revenue from our NEXA product line, which is earlier-than-expected evidence of customer interest in these newly developed products. And, we closed a sizeable opportunity for a commercial biometrics project and see others on the horizon. For these and other reasons, we continue to be optimistic about the prospects of our biometrics business.
We sold patents related to DSL diagnostic technology this quarter for $2.6 million which resulted in a $2.1 million gain.  The vast majority of our remaining patent portfolio relates to biometrics and imaging technology." “

Market Cap: 98.51M , Enterprise Value:  54.33M
Price/Sales:  3.91 , Price/Book:  1.88
Enterprise Value/Revenue :  2.17
Enterprise Value/EBITDA: 9.04
Profit Margin (ttm):  23.67% , Operating Margin (ttm): 21.85%
Revenue (ttm):  25.05M , Revenue Per Share (ttm):  1.11
Qtrly Revenue Growth (yoy): 39.70%
Gross Profit (ttm): 15.49M , EBITDA (ttm):  6.01M
Total Cash (mrq):  43.51M , Total Cash Per Share (mrq):  1.91
Total Debt (mrq):  0.00
Current Ratio (mrq):  12.96 , Book Value Per Share (mrq):  2.28
Operating Cash Flow (ttm):2.72M ,Free Cash Flow (ttm): 4.29M
52-Week Change:     -16.92%
52-Week High:6.79 ,52-Week Low: 3.46
Shares Outstanding: 22.80M , Float:  15.41M
% Held by Insiders:40.29% , % Held by Institutions: 23.70%
Short % of Float: 0.60%

Trailing Annual Dividend:1.75,
Trailing Annual Dividend Yield: 40.80%





“Noble Corporation operates as an offshore drilling contractor for the oil and gas industry. It provides contract drilling services with a fleet of 77 offshore drilling units, such as 14 semisubmersibles, 14 drillships, and 49 jackups, including 2 ultra-deepwater drillships and 4 high-specification jackup drilling rigs under construction. The company conducts its contract drilling operations in the United States, Gulf of Mexico and Alaska, Mexico, Brazil, the North Sea, the Mediterranean, West Africa, the Middle East, India, Malaysia, and Australia. Noble Corporation was founded in 1921 and is headquartered in London, the United Kingdom.” Yahoo Source

















Market Cap: 5.43B , Enterprise Value: 11.19B
Trailing P/E (ttm):   5.69 , Price/Sales (ttm): 1.12
Price/Book (mrq):   0.72
Enterprise Value/Revenue (ttm):   2.43 , Enterprise Value/EBITDA (ttm): 4.85
Profit Margin (ttm): 20.56% , Operating Margin (ttm): 29.21%
Return on Assets (ttm): 5.18% , Return on Equity (ttm): 11.30%
Revenue (ttm): 4.61B , Revenue Per Share (ttm): 18.16
Qtrly Revenue Growth (yoy): 22.20% , Gross Profit (ttm):  2.10B
EBITDA (ttm):  2.31B
Book Value Per Share (mrq):   28.43
52-Week Change:  -36.27%
52-Week High:  35.54 , 52-Week Low:    17.93
Shares Outstanding:    259.54M , Float:  252.53M
Short % of Float: 8.00%
Forward Annual Dividend Rate:  1.50 , Forward Annual Dividend Yield: 7.30%
Trailing Annual Dividend Yield:   7.90%  5 Year Average Dividend Yield: 1.70%






To be updated tomorrow 10/31/14




Monday, October 27

Cheap For a Reason or Too Cheap?? Intersections (INTX)

Intersections Inc.(NASDAQ: INTX) provides subscription based consumer protection services that help consumers understand and monitor their credit profiles and other personal information and protect themselves against identity theft or fraud.
Source Morningstar

Furthermore later this year INTX will offer a pet heath monitoring platform for dogs along with their other existing segments for bail bonds industry solutions, and customer loyalty programs.

A major risk and partial rationale for the large short position is revenue concentration and declining subscriptions. Bank of America accounts for 45% of revenue and the remaining up to 70% of total revenue are in the hands of a few US financial institutions.   

Intersections’ mean reverting attributes, 52 week change -56.23%, stock price near 5 year low, P/B and P/S near 3 year low. Another measure of cheapness I use is enterprise value to total non cash asset. The rationale is that by definition these historical transactions are classified as assets because they have value that will generate future benefits.
Current…  EV/Non Cash Assets = .82, 2011 EV/ Non Cash Assets = 1.77
Total liabilities have been reduced to 1.90 per share from 5.44 per share in 2009. P/B at 1.64 for the period ending 2010 currently trades at .80.  Share count has remained stable, slightly reduced from a share count of 19.20M 2009 to the MRQ of 18.50M. The trailing dividend of 0.80 or 21.00% is likely to be reduced or eliminated.

Positive insider activity during September 2014, OSMIUM PARTNERS purchased 677,292 shares for $2,598,676 or for an average price of $3.84 per share. Additionally, Director David McGough purchased 10,000 shares for $38,600 or $3.86 per share.

Additional Negatives:
High short interest at 41% of float, declining margins, TTM GM% of 66.2% down from a 2011 70.30%, 12.63% average ROIC from 2010 to 2013 (16.54   15.13   16.42   2.43) to the TTM ROIC return of -6.01%.  Qtrly Revenue Growth (yoy):-20.30%, revenue concentration risk along with regulatory changes.

Market Cap: 72.38M , Enterprise Value:  59.05M
Price/Sales (ttm): 0.25 , Price/Book (mrq): 0.79
Enterprise Value/Revenue (ttm):  0.21 , Enterprise Value/EBITDA (ttm): 6.76
Revenue (ttm):  278.26M , Revenue Per Share (ttm):  15.24
Qtrly Revenue Growth (yoy):  -20.30% , Gross Profit (ttm): 205.11M
EBITDA (ttm): 8.74M
Total Cash (mrq):  13.44M , Total Cash Per Share (mrq): 0.73
Total Debt (mrq): 1.96M , Total Debt/Equity (mrq):   2.19
Current Ratio (mrq):   1.69 , Book Value Per Share (mrq):  4.83
Operating Cash Flow (ttm):  12.43M , Free Cash Flow (ttm): 29.63M
52-Week Change:   -54.95%
52-Week High (Jan 14, 2014):9.10 ,52-Week Low (Sep 2, 2014): 3.32

Shares Outstanding: 18.51M , Float:  7.53M
% Held by Insiders:    10.77% , % Held by Institutions:   42.50%
Short % of Float (as of Oct 15, 2014): 41.00%
Forward Annual Dividend Rate:  0.80
Trailing Annual Dividend Yield: 0.40 , Trailing Annual Dividend Yield: 10.50% likely to be reduced or eliminated.

No position

Monday, October 20

Nano Cap, 37% Discount to NAV, 8.4% Dividend Yield


BDCA Venture (BDCV) is a closed-end investment company. They specialize in making pre IPO investments in emerging growth companies committed to and capable of a public listing.

Corporate Website 

The first thought, BDCV has an investment portfolio trading below fair market value. Further, take part in value accretion realized by participating before a private company goes public.

Source Corporate Website: “Private companies raise a final round of pre-IPO financing to strengthen their balance sheet and demonstrate continued investor commitment. And that’s where BDCA Venture fits in: BDCA Venture is an equity partner to private companies primed to become public. BDCA Venture typically invests in later stage, venture capital-backed private companies with at least $20 million in trailing 12 month revenue seeking to complete an IPO within 2 years.”

Many Micro cap stocks have been depressed. For this reason and others, BDCA price per share negatively impacted with a 52 week change of -33.43%. A strong capital return, dividend yield is 8.44%.

Why consider adding BDCV to a watch list?

BDCA Venture  is a nano cap trading at 45M, enterprise value of 36M led by a strong investment team. Investment team of 4 has the following investing credentials. CEO and founder held senior management positions in the Equity and Derivatives departments of Bear Stearns, Kidder Peabody, Nomura including a cum laude graduate of Harvard College.  The remaining 3 investment team members have experience at Goldman Sachs , all Ivy League graduates, merger/acquisitions attorney,  CFA holder.

Share buybacks and modification of its investment objectives announced 09/25/14 should help narrow the large 37% share price discount to its NAV. June 30, 2014 net asset value was 7.32 per share or $71.6 million. Cash of 9.8M made up 14% of the NAV, publically traded securities of 11.90M or 17%.

The investment objective modification is to direct cash from exited investments into debt investment opportunities. However, the investment team does not expect that the Company’s position in debt investments will constitute a meaningful portion of the portfolio prior to December 1, 2014. Also, the Company is not expected to make any share repurchases until early November after reporting quarterly results in late October.

Additional BDCV articles to include in your decision making process.

Zoosk And TrueCar IPOs Ready To Show How Undervalued Keating Capital Shares Are

A Good Case For Keating Capital

No Position at this time.

Monday, October 13

Political Uncertainty Creating Two Deep Value Opportunities




TransGlobe Energy Corporation (TGA)

TransGlobe Energy is an oil and gas exploration, development and production company. It operates in two segments, the Arab Republic of Egypt and the Republic of Yemen. Founded in 1968, it’s headquartered in Canada.

TransGlobe Energy was ranked #30 in Fortune Magazine’s 100 Fastest-Growing Companies of 2012.So what happened that transformed TGA into a deep value stock? The stock was $20.23 December 2010.

Financial results have been stellar with several years of proven capital allocation,high ROIC. The main issue comes down to fear of political turmoil in Egypt and the related issue with receivable from the state owned national oil company of Egypt (“EGPC”).They also had an operational issue with PCP pump failures that impacted production. The pumps have been fixed. Lastly, pressure on the price of oil, coupled with profound weakness in small capitalization stocks.

TGA now trades as a deeply undervalued company using any valuation metric, DCF, book value, NCAV, or earning yield.  

Mean reverting metrics;
3 year stock return is -16%, 52 week change -44.30%
Enterprise Value/EBITDA = 1.69, EV/EBIT = 2.19

Average annual ROIC from 2010 to MRQ is 16.86%, couple this with an EV 359,410,000/long term assets of 395,439,000 = .90: those assets based on historical returns should easily outperform the current market price for those long term assets.

Dividend yield trailing of 3.80% supported by strong financial position and free cash flow. Z score of 4.30 indicates a remote chance of bankruptcy.

Graham value number of $11.82 versus the current price of $5.08,
Historically and industry cheap valuation… EV/EBIT = 2.19, EV/Revenue = 1.14, P/TB = 1.05 =  NCAV = 3.22

NCAV = 3.22, Cash per share = 1.47, AR per share = 1.97, Current assets of 3.74 per share, Current liabilities of .51


Multiple catalysts exist for this financially sound high ROIC company.

No position at this time.

Valuation Measures
Market Cap: 380.65M , Enterprise Value:   359.41M
Trailing P/E (ttm): 5.71
Price/Sales (ttm):1.26 ,Price/Book (mrq):0.74
EV/Revenue (ttm):1.14 ,EV/EBITDA (ttm): 1.69
Profit Margin (ttm): 21.05% , Operating Margin (ttm): 48.15%
Return on Assets (ttm): 13.73% , Return on Equity (ttm): 13.10%
Revenue (ttm):  314.13M , Revenue Per Share (ttm):  4.22
Qtrly Revenue Growth (yoy):  -0.20%
Gross Profit (ttm):  249.89M , EBITDA (ttm):  213.18M

Total Cash (mrq):   110.06M , Total Cash Per Share (mrq):1.47
Total Debt (mrq):  88.81M , Total Debt/Equity (mrq): 16.58
Current Ratio (mrq): 9.29
Book Value Per Share (mrq): 7.15
CFFO (ttm): 167.94M . FCF(ttm): 58.42M

52-Week Change: -44.30%
52-Week High: 9.66 , 52-Week Low:  4.93

Shares Outstanding:    74.93M , Float:  71.68M
% Held by Insiders:    4.53% , % Held by Institutions: 40.00%
Trailing Annual Dividend Yield:   3.80


CTC Media, Inc (CTCM)
Another idea trading at a deep discount due to political uncertainty is Russia Media CTCM: CTC MEDIA INC.

Both CTCM and TGA moved higher today, TGA +3.35% and CTCM +3.31%. My work was based on Sunday night’s prices but the thesis is still intact.