7/26/2010

Small Cap Wide Margin of Safety with outstanding ROIC: ARDNA: Arden Group

ARDNA is a small cap with outstanding consistent ROIC and real estate properties recorded at a significant discount to market value. The company owns real estate properties that include two freestanding supermarket properties and a shopping center located in Calabasas, California.


On February 8 I posted “Book value and real estate plays” and introduced ARDNA, Arden Group; LUB, Luby's Inc; and RLH,Red Lion Hotels Corporation.

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On February 8th  ARDNA was $90.82 with a 1.10% dividend yield, LUB was $3.32, and RLH was 5.89.
The price on 07/26/10 is ARDNA ($91.10), LUB ($5.13 up +55%) and RLH ($7.61 up +29%).

ARDNA at $91 is not that far from its 52 week low of $85. I believe this 287 million market cap stock with a 267 million enterprise value has been unjustly ignored.

ARDNA operates supermarkets in southern California. They offer more higher margin products found in the typical supermarket such as a wide selection of imported foods, unusual delicatessen items, organic, natural foods and other products/services.

Financially they post the highest consistent ROIC as compared to their other publically held peers in the grocery stores industry. Pre tax ROIC was 43.96% (2010), 63.20% (2009), 39.20% (2008) and 33.49% (2007). Price to cash flow is consistently more the twice the industry at 12% for the TTM. Outstanding share count has been stable with a shareholder friendly clean capital structure. The share price returned a -3.90% 3 year average annual return and -35.71% for the prior 52 weeks. Revenue growth was -3% for the year over year recent quarter. GP/EV is currently 61%. Total debt has been reduced from 2007 to the TTM.

I hold a position in ARDNA

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