Cash Rich Deep Value Micro Cap

Ambassadors Group(EPAX) Price on 05/05/14 = $3.63

Ambassadors Group is an educational travel company. It organizes and promotes international and domestic educational travel and sports programs for youth, athletes and professionals. A direct consumer model is used organizing and promoting worldwide educational student travel. Also, student and adult travel programs operate using the People to People brand under a long-term license agreement. Ambassadors Group has been traveling students on People to People programs for over 50 years, over 500,000 alumni. Association with that brand coupled with deep experience in educational travel give powerful market awareness and credibility.

The core program under the People to People brand is international destination trips for U.S. students ages 10 to 17 (“Student Ambassador Program”). Student Ambassador Programs account for the majority and strategic focus. Also, the People to People brand offers domestic destination travel programs for U.S. students and international students. Its focus is on leadership and education (“Leadership Ambassador Program”) as well as professional travel programs for adults (“Citizen Ambassador Program”). 

EPAX is historically and market cheap, aggressive share count reduction, positive insider activity (2013, 2012)

15% reduction in share count from a 2009 balance of 19,105,000 to most recent reported 16,713,000. Price/ Net Cash = 4.70, Price / Tangible Book = 1.40, TTM gross profit per share $2.60.

The company was founded in 1967, listed publicly 2002. Ambassadors Group has an excellent history of capital allocation demonstrated by returning cash to shareholders, aggressive share buybacks. To that point corporate HQ building located in Spokane, Washington is up for sale, 13 million sale price.

The current board has activist value institutions serving. Lisa O'Dell Rapuano, CFA serves on the board holding 1,194,959 shares for Lane Five Capital Management. Rapuano spent ten years at Legg Mason Capital Management. At Legg Mason, she was the Research Director and portfolio manager for Legg Mason Special Investment Trust. Further, she co-managed this fund with Bill Miller from 1997-2000. She ranked in the top-decile returns reported by Lipper as the sole fund manager (2001-2003).

ValueAct’s Peter Kamin serves on the board, holds a large stake (242,317 shares). Before Value Act in 2000, Peter founded and managed Peak Investment.In addition, Peak generated a nine year compounded rate of return over 20%. Kamin holds a BA from Tufts and an MBA from Harvard. Also, BANDERA PARTNERS holds 3,051,697 shares.

Market Cap: 60.82M , Enterprise Value:  3.95M
Enterprise Value/Revenue:   0.08 ,  Price/Book:   1.40
Enterprise Value/EBITDA: 0.66
Revenue (ttm):  49.70M ,Revenue Per Share (ttm): 2.99
Qtrly Revenue Growth (yoy):  -51.70%
Gross Profit (ttm):  43.64M ,EBITDA (ttm):  5.96M
Total Cash (mrq):  64.41M ,Total Cash Per Share (mrq):  3.84
No Debt, Book Value Per Share (mrq):2.91
Operating Cash Flow (ttm): 13.99M , Levered Free Cash Flow (ttm):   9.98M
52-Week Change:5.22%
Shares Outstanding:16.75M , Float:  11.97M
% Held by Insiders:  11.09% , % Held by Institutions:  68.10%
Short % of Float: 0.40%

Small long position in EPAX


writser said...

Isn't the 64m in cash a bit optimistic? A lot of that are participant deposits that have been added during the latest quarter - it's more like float if anything and it fluctuates heavily per quarter (probably most holidays are in the summer?) The company itself talks about 'deployable cash' of $15m.

Nevertheless an interesting idea, thanks. Looking forward to your update.

buffettinvestor said...

Dear Shadow. Great work thanks for writing so many interesting cases up. On EPAX I agree with writser: They owe 60m in pre-paid deposits to their customers - i.e. that cash is gone once the business is gone. Valuing it as float would result in a lot lower value. To me the business appears in terminal decline i.e. I wouldn't assign much value to it. Kindly Sascha

ShadowStock said...

Thanks writser , that’s a good point. Participant deposits are included in that 64M cash balance. Yes the strong season is upon us. John

ShadowStock said...
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ShadowStock said...

Thanks Sascha!! Just trying to find / introduce ideas. It’s become more difficult in this market. I often use historical posts to find investable ideas for my personal portfolio. Some may have sold off or improved.

Yes I agree the business appears in terminal decline. But to that point there are “no bad assets just bad prices”. Ben Graham would be proud of me, ha. John

ShadowStock said...
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ShadowStock said...

News 05/08/14:

Ambassadors Group CEO Dombrowik to leave company
Ambassadors Group appointed Philip Livingston to serve as the company's new interim CEO. Livingston replaces Anthony Dombrowik, who will be pursuing opportunities outside of the company. The company also announced its slate of directors for its board, which included two new members, including Livingston and Jefferson Gramm, a principal at Bandera Partners, which owns 18% of the company's outstanding stock.