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A big net-net puzzle.


alertmeipp
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cash is $3.5 per share, no debt.

Income has been around break-even for last couple years and projected to be again break-even next.

Invest heavily in R&D, pretty much spend all cash flow on it.

Cash in RMB, so their income statement is boosted by forex rate a bit.

 

Currently trading at $2.1.

 

Symbol: ACTS...

 

why so cheap? and it has been cheap for a long time. I have it on and off for couple years.

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The new CEO is an engineer and committed to expanding the product line rather than returning cash to shareholders. Every conference call, management says there weren't any block trades to allow buybacks. The idea of a Dutch tender has been raised by Richard Fearon of Accretive Capital and management appears receptive but continues not to act. Revenue guidance was up for next quarter so it looks like they have turned the corner and good things could be coming but the lack of a true activist investor leads me to think earnings will have to be the catalyst to unlock value.

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The new CEO is an engineer and committed to expanding the product line rather than returning cash to shareholders. Every conference call, management says there weren't any block trades to allow buybacks. The idea of a Dutch tender has been raised by Richard Fearon of Accretive Capital and management appears receptive but continues not to act. Revenue guidance was up for next quarter so it looks like they have turned the corner and good things could be coming but the lack of a true activist investor leads me to think earnings will have to be the catalyst to unlock value.

 

 

Tech cos typically hoard any cash they accumulate.  If an activist investor covets them, an easy defense is to spend their cash to buy R&D or to buy a related tech co.  Tech cos love to keep cash to provide a cushion for when they may lose their edge.

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Looking for another net-net?  How about Peerless Systems (PRLS)?  It's a former printing technology company that is phasing out of that and looking to deploy capital in more favorable environments.  They had bought a decent-sized stake in Highbury Financial, and recently helped force a sale of Highbury to Affiliated Managers Group.  As a result of all that, PRLS is now trading at less than cash value.  The management doesn't seem intent on burning cash like we tend to see with other technology companies that happen to trade so cheaply - they are walking away from their printing technology operations.

 

Granted, it's not trading way below cash value, but still...

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I know others that are trading below cash, most of burning cash and have broken business models.

 

But ACTS is different, we are talking about 70% return if pps just returns to cash value. Plus, I can see a growth story over next 5 years in Asian market.

 

 

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  • 2 months later...

Looking for another net-net?  How about Peerless Systems (PRLS)?  It's a former printing technology company that is phasing out of that and looking to deploy capital in more favorable environments.  They had bought a decent-sized stake in Highbury Financial, and recently helped force a sale of Highbury to Affiliated Managers Group.  As a result of all that, PRLS is now trading at less than cash value.  The management doesn't seem intent on burning cash like we tend to see with other technology companies that happen to trade so cheaply - they are walking away from their printing technology operations.

 

Granted, it's not trading way below cash value, but still...

 

Just following up on this one.  Peerless has decided to offer $3.25 for anyone who'd like to tender their shares.

 

http://finance.yahoo.com/news/Peerless-Systems-Corporation-prnews-1871047385.html?x=0&.v=1

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Guest HarryLong

Another net net puzzle.

 

Calamos Asset Management is a net net I think.  They advise Convertible Bond funds, Bond funds,  Total Return funds, and a Growth Equity fund.  The founder owns all the voting stock.

 

It is trading at $9.33/share.

 

Cash less all debt= 230million.  Market cap 186 Million.  I included in cash, investments that the asset manager has invested in its own funds.  I am not sure if that is the right way to do it, when determining if a company is a net net.  The price to free cashflow is 1.5. 

 

(Free cashflow return on (tangible assets less cash)) in 2009 is 137/165= 83%.  2008 is 121/200= 60%.  2007 is 203/600= 33%.  2006 is 243/105= 231%.  2005 is 183/247= 74%.  2004 is 123/216= 57%

 

I can not figure out why it is trading so cheap.  The only reason I can think of, is if 5-10 years out free cash flow dropped by half or more due to fund outflows.  Since 2006, free cashflow has dropped by 35%.

 

Am I missing something?  Does anyone have any thoughts on this company?

 

Thanks,

 

Hugh

 

Fiscal Period                   Dec04 Dec05 Dec06 Dec07 Dec08 Dec09

     

Revenue per Share ($)       13.57 18.15 20.95  22.21 20.08  14.36

EBITDA per Share               5.80  10.33 11.40   9.40   9.36   5.62

Free Cashflow per Share      5.35    7.95 10.51   9.54   6.19   7.05

Earnings Per Share ($)         4.62    1.27  1.47    1.30  -1.26  4.35

Dividends Per Share --         0.28    0.36  0.44    0.38   0.22   0.23

Book Value Per Share           6.89   8.09   9.26   10.02  7.73  19.36

Month End Stock Price         27.00 31.45 26.83  29.78   7.40  11.52

 

Annual Rates (per share) 10 yrs  5 yrs  12 months 

Revenue Growth (%)        0         1.9  -13.2 

EBITDA Growth (%)           0        -1.8  4.8 

Free Cash Flow Growth (%) 0         -2.4  0 

Book Value Growth (%)        0        15.7  76.9 

 

P/E 11.3 P/B 0.5 P/S 0.6 Market Cap $186 Mil

 

 

 

Hint, hint, keep digging.

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Guest Bronco

I am always leery of these related party transactions.  Leo Wells.  Vernon Hill (who ran a great bank). 

 

Once I read about the leasing of the jet for Calamos, I stopped reading further.

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The other thing that I am not sure about concerns the consolidation of Calamos Holdings results into Calamos Asset Management's financial results.  Calamos Holdings is owned 78% by the founder and 22% by (Calamos Asset Management CLMS).   So if Calamos's cash less all debt for 2009 is $230 million, is (Calamos Asset Management CLMS)'s real ownership of net cash actually 22% of $230 million= $50.6 million?  If Calamos has $32 billion in assets under management, is (Calamos Asset Management CLMS)'s real assets under management 22% of $32 billion= $7 billion?  If Calamos has free cashflow for 2009 at $137 million, then should it be 22% of 137 million= $30 million?

 

I think that in the most recent 10-q, it says that it is unitized, so I should not look at it as 22% of all the numbers.   I am confused.

 

Hugh

 

Thanks for all the digging.  Looks more like an obstacle course than a set of one foot high hurdles.  :(

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What trades is a minority of the shares.  This is common amonst some money managers (Pzena is another) where management owns the majority of the shares and a small minority is traded.  The last annual report has a good discusion of this for Calamos.  The fully diluted share count is 97 million, therefore valuing Calamos @ 2.1% of AUM and 4.8 x FCF.

 

Packer

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You got it figured out.  Asset manager net-nets are extremely rare.  When one exists it is usually due to the company experiencing significant ongoing losses.  Calamos was briefly a net-net at the end of 2008.  Highbury was as well.  Even though CLMS is not a net-net it is still one of the more attractively priced asset managers in my opinion.  I have it at less than nine times earnings (net of cash).  A 3% yield too.   

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