6/14/2010

"Tails I win ..heads I don’t lose too much"

I believe this is one of Mohnish Pabrai’s favorite quotes. These are my exact thoughts on NOOF (New Frontier Media) as I purchased additional shares Friday.


Large non cash write downs continued as NOOF reported another large net loss of -5.076 million for the quarter ending March 31 2010. But I believe NOOF still has significant deep value. NOOF’s cash balance has increased and debt was reduced for the year ending 03/31/10 compared to the prior year end period. Cash flow continues to be outstanding .

This is far from a sure investment even with 17.187 million in cash, 9.685 million in total liabilities and a market cap of only 32 million. The greatest risk is how management allocates the 17.187 million in cash or .88 per share. Net cash is .33 per share.

Potential catalysts would include a special dividend, regular dividend, additional share buybacks, or new accretive acquisitions opportunities given the relative restrictive financing environment.

On the 06/11/10 conference call the CEO did mention continued execution of their share buyback programs and “we have been out in the marketplace and there are some strategic opportunities for us that we are looking at very carefully. There are some asset plays, some content libraries that have come into our foray that we are looking at.”

“And so I think anything we looked at is going to be accretive for New Frontier. I mean, we are very – as you know, we are very judicious on how we spend our money and we just think that there are more and more opportunities, there are several opportunities for us in Europe to deploy some capital that we think would be accretive for the company, as well as some domestic assets that we are looking at, plus the stock buyback.”

Transcript for conference call on 06/11/10


Additional investing points

Reducing share count from 2004

12 million spent on share buybacks over 2008 to 2009

Small insider buys in 2009 and no insider sales during 2010

Reducing debt from 16.5 million in 2007 to 12.40 million for the TTM

Book value of 2.94 with a current price of 1.68

Value instituions: WHITEBOX ADVISORS, ROYCE & ASSOCIATES, RENAISSANCE TECHNOLOGIES ,Robeco Investment Management are holding a position

ROIC mean reversion candidate: 05-08 ROIC averaged 24.71%

Margin expansion is likely according to the recent conference call.

Per share data: based on the 12 month period ending 12/31/09

CFFO = .12

FCF = .07

OI = .32

EBITDA = .73

NTA = 1.88

As of 03/31/10

Cash per share = .89

AR per share = .56

Cash + AR – total liabilities = .89 -.56 - .49 = .96 (nice margin of safety versus current price of 1.68)


Additional thoughts from Value investor Saj Karsan. Barel Karsan posted his thoughts on NOOF

Click to read

2 comments:

Adam Sues said...

ShadowStock,

Thanks again for your comments on my analysis.

In addition buying back shares, the company has also returned a good portion of cash in the form of dividends - I think this trend will resume now that the writedowns are complete.

I've been watching NOOF since February. You can read my original thesis here: http://bit.ly/dBR6ts

And obviously my most recent post:
http://bit.ly/9u1Rsf

ShadowStock said...

NOOF is in a good position. They have many opportunities to move the stock higher with little effort.

I posted the following on NOOF at seeking alpha

http://seekingalpha.com/article/123544-creating-shareholder-value


NOOF was $1.43 now a disappointing $1.80

PLXT was 2.14 now 4.16

FEIM 2.58 now 5.10

PTG was 2.54 now 2.40