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RHDGF - Retail Holdings


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  • 1 month later...

Hey, that's my article!  :)

 

FWIW, I'm waiting to see whether the deal for Singer Bangladesh closes or not.  If they close, then I'd expect a very quick return of capital, and depending on where the stock trades from there, it could prove to be another good investment in a few months.

 

(I exited the stock when it jumped to $18 since my cost basis was $11.50.  It was just serendipity that the company announced they had sold Singer Bangladesh the day I posted the article.)

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  • 4 months later...

Back in again. The decision not to sell the Bangladesh subsidiary was a good one considering the record profits they continue to make there. Considering the performance of the company over time, their stated goal to maximize value of assets and liquidate the company, coupled with their upcoming distribution to shareholders of at least $1/share makes it attractive.

 

From Summary Annual Report:

 

The Company’s net asset value at December 31, 2010, attributable to the ReHo shareholders, was $90.7

million, equivalent to $17.09 per Share outstanding. This essentially reflects the book value of the

Company’s investment in Singer Asia, the amount of the KSIN Notes and the cash at the ReHo holding

company. Using the $175.7 million derived “market valuation” for Singer Asia attributable to the ReHo

shareholders, the amount of the KSIN Notes and the cash at the ReHo holding company, the

corresponding figure would be approximately $203.7 million, equivalent to $38.38 per Share.

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  • 2 years later...

WILLEMSTAD, Curacao, Sept. 24, 2013 /PRNewswire via COMTEX/ -- Retail Holdings N.V. (symbol:RHDGF)

 

Retail Holdings N.V. ("ReHo" or the "Company") announced that Sewko Holdings Limited ("Sewko"), a newly-formed subsidiary to hold Singer Asia Limited and its subsidiaries and associate companies, has today lodged with the Monetary Authority of Singapore a Preliminary Prospectus for a proposed initial public offering ("IPO") of the Sewko shares on the Main Board of the Singapore Exchange Securities Trading Limited ("SGX-ST"). Stephen H. Goodman, ReHo's Chairman, President and CEO noted, "This is an important step in our effort to list the Sewko shares, but there are still considerable risks and uncertainties as to timing, completion and valuation."

 

Here's a link to the prospectus: http://masnet.mas.gov.sg/opera/sdrprosp.nsf/936bad13609791c948256b3e001ed49f/9583B2977F9DF25F48257BF00014EBE6/$File/SIP1308003_P_Aida_Prelims(1011)C.pdf

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  • 6 months later...

ReHo deferred the IPO because of bad market circumstances in Asia. Shares have been trading down a bit and are now around $19. The 2013 annual report should be coming out soon. Singer Sri Lanka had a disappointing year, earnings down by 60%Y/Y (annual report). Thailand earnings were up 40% Y/Y. Singer Bangladesh annual results are not released yet but the first 9 months were roughly in line with 2012. All these results are in local currency. Due to the emerging market sell-off results in USD are probably slightly weaker than last year.

 

Doesn't really matter, still looks like good value imo.

 

* CEO has 25% of shares outstanding and has incentive to liquidate the company.

* Market value of listed subsidiaries + KSIN notes is around $30 / share.

* History of distributing excess capital, returned around $9 /share since 2007.

* Nice bet on emerging markets.

 

If anybody is interested, I made a small sheet calculating the live market value of their listed subsidiaries: link. Google docs, cool stuff.

 

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2013 Results are out.

 

Annual report: http://www.retailholdings.com/disclosureStatements/disclosureStatementsFile_100.pdf

Press release: http://www.retailholdings.com/pressReleases/pressReleasesFile_126.pdf

 

Apparently Bangladesh was in political turmoil this year (something I shamefully have to admin I didn't know anything about) and Singer shops were closed in Bangladesh for "78 trading days nationwide and a further 53 days regionally". That Singer Sri Lanka was not having a good year was already known. Net profit was $7.5m as opposed to $10.3m last year but 2013 results include a $2.5m expense for preparing a possible IPO. So they managed to maintain profits despite strikes in Bangladesh, protests in Thailand, a 60% profit drop in Sri Lanka and an appreciating dollar.

 

One thing that bothers me is that they sell 50% on credit and that receivables in arrears are trending up. Could be attributable to the political turmoil but also a potential 'underwriting' problem.

 

2010: 1.9%

2011: 1.5%

2012: 2.2%

2013: 3.3%

 

But all in all nothing really changes the long thesis: listed holdings + control premium + notes + excess cash should still be worth ~ $30 / share. Company still growing & profitable, trying to IPO and returning excess capital.

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  • 3 weeks later...

My problem with Retail Holdings is an inability to get a handle on the KSIN note.  Does anyone know what the collateral is on the loan? If SVP eventually throws in the towel on the loan, what does Retail Holdings get back?  Would Retail Holdings no longer have to pay a royalty on the Singer name?

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  • 1 month later...

My problem with Retail Holdings is an inability to get a handle on the KSIN note.  Does anyone know what the collateral is on the loan? If SVP eventually throws in the towel on the loan, what does Retail Holdings get back?  Would Retail Holdings no longer have to pay a royalty on the Singer name?

 

No clue, but for me it wasn't really relevant to the thesis. You can discount the note 50%, even 100% and it would still be trading at a significant discount to the sum of the listed subs. Also some payments seem to come in so I'm not that worried.

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  • 4 months later...

This stock has been going nowhere for a while even though the local subs have been doing well.

 

Singer Sri Lanka ~ +20% YTD

Singer Bangladesh ~ +20% YTD

Singer India ~ +80% YTD

 

These numbers are all in local currency. However, also in USD terms I have a rough sum of the parts valuation of around $34 as opposed to $29 or something when this thread was last updated. Cash at the holding level is a bit difficult to estimate; a $1 dividend has been paid but the subs should have brought some cash in as well. With RHGDF trading around $18 today you own a bunch of growing emerging market businesses with an almost  50% discount to fair value. Granted, I haven't looked at the valuations of the subsidiaries themselves.

 

Unfortunately there is still no news on the alleged IPO but at least they pay out a juicy dividend in the meantime. I'm thinking about buying a bit more. What am I missing?

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Writser, thanks for periodically resuscitating this one, since I missed the earlier incarnations.

 

Some investors might see this as a Dutch company, since it's one of those naamloze vennootschaps.  Perhaps most would classify it as an emerging Asian company, since that's where all the business is.  But the management is American, and the stock itself is listed and traded only in the US.

 

If you give any consideration to country/regional weightings in your portfolio, how do you categorize this stock?

 

The U.S. market Shiller PE is among the highest in the world at 27, and the emerging Asians are at about 16.  If the U.S. were at nosebleed bubble PE levels (say >40), would this make you hesitate somewhat from buying Retail Holdings?  Or does the company-level valuation outweigh all?

 

 

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Writser, thanks for periodically resuscitating this one, since I missed the earlier incarnations.

Thanks. I randomly checked my Retail Holdings spreadsheet yesterday and the estimated NAV turned out so high that I figured something was wrong with my calculations. That's why I put some work in this name, posted my thesis here again and nagged a few people. The writer of OTCAdventures, a much better investor than I am, picked up on this (it could just be a coincidence) and wrote an update for his blog today: http://otcadventures.com/?p=1480 . A great read to get up-to-date. Fortunately he arrived at roughly the same NAV.

 

If you give any consideration to country/regional weightings in your portfolio, how do you categorize this stock?

I do give a little consideration to that, ideally I'd like to have some attractive stocks all around the world. For all intents and purposes I would qualify this as a true emerging markets stock since that's where their operating subsidiaries actually do business.

 

This is an interesting question however and something that has been bothering me for a while. For example if you invest in MSCI Spain you have huge positions in Santander and Telefonica and you could argue the results of these companies depend mostly on their large foreign (emerging) subsidiaries. And if you invest in MSCI Taiwan you have a huge position in Taiwan Semiconductor. You could argue the results of that company depend mostly on developed markets instead. Lots of these thematic funds don't really have the exposure you would expect them to have. Anyway, I'm getting off-topic.

 

The U.S. market Shiller PE is among the highest in the world at 27, and the emerging Asians are at about 16.  If the U.S. were at nosebleed bubble PE levels (say >40), would this make you hesitate somewhat from buying Retail Holdings?  Or does the company-level valuation outweigh all?

I would pay very little attention to that. So far, the US market has been skyrocketing and RHDGF is going nowhere. I expect (hope :))) that will be true the other way as well.

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  • 3 weeks later...

Retail Holdings is entering Cambodia as per this press release: http://www.retailholdings.com/pressReleases/pressReleasesFile_132.pdf

 

Kind of surprising to me given that people were expecting for them to wind down/liquidate the business. Singer Asia to my knowledge is not active in Cambodia, but it is really surprising that the entry is done by Retails Holdings rather than Singer. They have just opened store #1 in Battabang, expect to follow up with #3 an #3 in early 2015 and expand the network to 50 stores.

 

I don't really know what to think about this, it appears like a complete reversal of former stragegy. Does RHDGF which I looked at as a shell company have the resources/knowledge/manpower to start up in Cambodia? Are they offering the products that Singer is offering in other countries? Would be interesting to understand more about this move...

Does anybody know more /can make more sense of this?

Alternatively, any Corner member based in Battabang who might go and check out the store  ;) ?

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Sorry, just to clarify, my comment was not intended to be a smart-**s comment.  I have avoided a number of dud stocks based on how the management treated me when I called.  If you are a shareholder and they view their shareholders as partners, most management folks are more than happy to talk to you and answer reasonable questions. 

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lathinker,

 

At first I read the press release the same way that you did, i.e. Retail Holdings was opening stores in Cambodia. However, if you read the second paragraph you will note that they write "Retail Holdings holds three principal assets: 1) a 54.10% equity interest in Sewko/Singer Asia, a distributor of consumer durable products in Bangladesh, India, Pakistan, Sri Lanka, Thailand and now Cambodia ...". So it is Sewko/SingerAsia that is opeing the stores not Retail Holdings, which obviously makes more sense.

 

I'm interested to hear whether they confirm this, however.

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LongTerm,

 

thanks for reading this more accurately than I did.

 

You are precisely right: ReHo confirmed by Email that Cambodia will be opened under Sewko and the opening is part  of the overall strategy to maximize the value of the business pending its ultimate disposition.

 

Company came back very quickly on this question btw.

 

 

 

 

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  • 4 months later...

2015 annual: link .

 

Nothing exciting. $1 dividend announced. Look-through earnings were a bit disappointing even though revenue has been ramping up for the past few years. I have the value of listed subs + cash + note pegged at around $30 now.

 

 

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Middling results for 2014, but management seems pretty optimistic for 2015. Here are the chairman's comments:

 

"I remain optimistic about 2015 and later years.  I anticipate a marked improvement in Sri Lanka's performance, reflecting accelerating economic growth, helped by lower oil prices, an improving agriculture picture, an increase in government salaries, and an uptick in consumer confidence, as well as the launch of a major new financial services initiative.  In Bangladesh, a lot will depend on political developments, but the Company's performance should improve in any case, particularly in the second half of the year, as the Company's new refrigerator factory begins production, and other improvements now under way impact results.  Pakistan and Thailand's performance should also improve as new initiatives impact results.  I expect India to continue to grow strongly.  Revenue and profits in 2015 and later years will also benefit from the rollout of the new Cambodian business and from the Company's ongoing investment in new and renovated shops and in new products, brands and services."

 

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Yes, Singer Asia has been growing at a nice pace. At some point hopefully the troubles in Thailand and Bangladesh will go away and earnings will follow. By the way, a fellow forum member pointed out that I missed that Singer Bangladesh shares outstanding have increased by quite a lot since I last updated my model. Retail Holdings stake is more valuable - NAV is closer to $32.25 instead of $30 if I am correct.

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I see 28.43 per share excluding the notes which I exclude for conservativeness. The shares of their listed subs actually dropped quite a bit in the last few months. Calculations are attached, please let me know if you disagree.

 

The dividend is expected to be paid in October 2015, but I did not find a precise date. In 2014, it was 6-Oct.

 

LT

ReHo_Singer_SOTP_Forum.xlsm

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