Canlan Ice Sports - trading at $1.30, worth $4-5?

[warren b]

From marketdepth:

 

Even on a status quo discounted cash flow basis, the current $16M equity value seems far too cheap for this business.  A more reasonable cash flow value might be over $50 Million or $4 per share.  However, adding even $5-10 Million for untapped alternative real estate uses and $4-6 Million for a corporate sponsorship or naming rights deal would bring fair value in the $60-70 Million range or $5 per share.  Beyond this level, a much higher price might exist were Canlan to attract the attention of a less price sensitive buyer such as Mr. Balsillie.

 

On the downside, the presence of the Barker family’s 75% stake provides some hope of support for equity if operating income declines sharply due to the recession.  Having propped up the business this long, one doubts the Barkers would let their stake go to zero on a covenant breach.  With a very plausible tripling scenario and not much risk of a permanent loss of capital, Canlan presents an investment opportunity with odds stacked in favour of a worthwhile return.

 

www.marketdepth.typepad.com

 

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Looks good to me.  Any thoughts?