writser Posted August 13, 2018 Share Posted August 13, 2018 Yeah, but that information was already out there. Not much exciting news as far as I can see, boring but good. Cash at the Sewko & Holding level building up again and underlying results seem ok. “The Company is currently pursuing divestment opportunities in Bangladesh and India, has resumed share sales in the market, and will seek to divest its remaining shareholding in Sri Lanka. [..] The Company anticipates ending 2018 with a cash balance of more than $8.0 million at Retail Holdings corporate, in addition to cash at Sewko and its operating subsidiaries. [..] For the six months ended June 30, 2018, royalty income at Retail Holdings exceeded royalty expense by 0.6 million Probably means another $3 -$5 dividend next spring, possibly more if they engineer a block sale. I've pegged NAV around $12.50 as of today. That's with all the Bangladesh non-remittance shares and receivables marked down to zero (could be worth up to $5) and no value assigned to the royalty stream (could be worth another few dollars per share). Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted September 13, 2018 Share Posted September 13, 2018 It may be due to the limited liquidity, but RHDGF doesn't seem to track movements in Singer Bangladesh's stock price as well as it "should" in an efficient market. I think it's starting to (yet again) look quite attractive. @ $11.90 a share my model shows a ~28% discount. That includes my estimates of future holding company overhead, CEO cash awards, and a 50% discount for the non-remittance shares. I think my estimates are fairly conservative, but (as always) please do your own work. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted September 26, 2018 Share Posted September 26, 2018 Came across a link to this blog post on Twitter. It's a good overview of the current Retail Holdings situation: https://hiddenvalue.blog/2018/09/25/retail-holdings-nv-otcrhdgf/ Link to comment Share on other sites More sharing options...
writser Posted September 26, 2018 Share Posted September 26, 2018 He's off on the Bangladesh shares. Most importantly he forgets to mention that there are sale restrictions on the 15m non-remittance shares held by Sewko. Apart from that it's a nice summary. Link to comment Share on other sites More sharing options...
NeverLoseMoney Posted September 26, 2018 Share Posted September 26, 2018 Given the increased turbulence in emerging markets, doesn't RHDGF deserve a wider discount to NAV now than in the last few years? The conditions for selling a large interest in Singer Bangladesh are probably less favorable than they have been. Link to comment Share on other sites More sharing options...
Hielko Posted September 27, 2018 Share Posted September 27, 2018 He's off on the Bangladesh shares. Most importantly he forgets to mention that there are sale restrictions on the 15m non-remittance shares held by Sewko. Apart from that it's a nice summary. He does mention it in the last paragraph, but I think he does take that issue a bit too easy. I think there is a real risk that these shares are more or less worthless. I doubt you can just sell them to local investors to get around the non-remittance restrictions. Otherwise the solution to the accumulated cash is also quite easy. Just sell the cash to a local investor... and ka-ching! the local investor pays you. The whole idea of non-remittance is that there is no cash going to go from Bangladesh to the outside. So the sole value of the shares and accumulated cash is more or less the possibility that at some point things change in Bangladesh. Which might take a very very long time since these shares were already created decades ago, and so far nothing... Link to comment Share on other sites More sharing options...
writser Posted September 27, 2018 Share Posted September 27, 2018 Indeed, they way I read it the blogger only thinks the dividends can't leave the country and is not taking into account the fact that selling these shares and repatriating the proceeds is impossible too. So yeah, he's way too optimistic. I think a big haircut is appropriate as the Bangladeshi government has no incentive to 'go easy' on the non-remittance shares. That would make them look stupid (and investable money would flow out of the country). But I think you might be a bit too pessimistic: 1. A Trumpian "terrific deal" would be an improvement over the current situation for both parties: i.e. Sewko agrees to pay a ridiculous amount of taxes over a sale to allow repatriating proceeds. Even a hypothetical 75% would be fine for shareholders at current prices (and surely juicy for the Bangladeshi government). Not sure how likely this scenario is but I wouldn't rule it out completely. Literal quote from a press release last year: "[..] a restriction that the Company is seeking to eliminate or modify." 2. "These shares were created decades ago, and so far nothing". True, but the relevant question is whether Retail Holdings has been actively trying to find a solution to this problem before. You don't start negotiating this issue without good reason (which the company now has: it wants to liquidate). I.e. you don't buy non-remittance shares and contact the government a year later to lift restrictions 'just in case'. 3. Retail Holdings still maintains that they will commence the 'ultimate liquidation' of the company within one or two years and the CEO has a huge position. The company seems to think a solution will be reached and given that the value of the non-remittance shares is substantial I don't think that solution will be: fuck it, they're worthless. We can argue over what haircut is fair but even if you apply a 75% haircut your expected IRR won't be too bad given that they will probably return a significant amount of capital in 2019. This is all just armchair theorizing so take it with a grain of salt. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted October 15, 2018 Share Posted October 15, 2018 RHDGF's remaining stake in Singer Sri Lanka has been sold. http://www.retailholdings.com/pressReleases/pressReleasesFile_170.pdf Link to comment Share on other sites More sharing options...
writser Posted October 15, 2018 Share Posted October 15, 2018 You beat me to it. Sale was expected but still nice to see the money in the bank. Link to comment Share on other sites More sharing options...
Mondegreen Posted November 19, 2018 Share Posted November 19, 2018 Does anyone have an updated value post sale/dividend? Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted December 18, 2018 Share Posted December 18, 2018 Spread has widened again (aka RHDGF has declined more than the value of its assets). Once more into the fray! Link to comment Share on other sites More sharing options...
writser Posted January 2, 2019 Share Posted January 2, 2019 Yep. Already one of my larger positions but I bought some more shares the past few days. If you mark down all non-remittance shares and dividends to zero there should still be ~$10m in cash at the holding level (either directly or as a pro-rata amount of the cash at Sewko level) and ~$50m in Singer India and freely tradable Singer Bangladesh shares vs a $45m market cap. That's a ~20% discount depending on what assumptions you make regarding compensation. Company is liquidating: I expect a $1.50 / $2 dividend this spring. Heavy insider ownership and insiders have the right incentives. And if an agreement can be reached regarding the non-remittance shares and dividends there's up to ~$6 / share in additional upside. And finally, the underlying companies have been performing well lately, appear reasonably priced and you have some exposure to a an emerging markets that's hard to get in any other way. What's not to like? Link to comment Share on other sites More sharing options...
IceCreamMan Posted January 3, 2019 Share Posted January 3, 2019 Does anyone have a guess on the amount of taxes that Retail Holdings will pay (directly or through Sewko) upon selling the equity interests? Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted January 3, 2019 Share Posted January 3, 2019 Does anyone have a guess on the amount of taxes that Retail Holdings will pay (directly or through Sewko) upon selling the equity interests? I think the answer is ~$0, but I'm not an expert on Indian or Bangladeshi tax law. IIRC they sold significant amounts of both Singer India and Singer Bangladesh in 2017 without incurring tax liability. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted March 7, 2019 Share Posted March 7, 2019 Singer Bangladesh's business performance continues to impress, with 2018 revenue up nearly 24%. Presentation link below. https://singerbd.com/pub/media/wysiwyg/investor_presentation_dec_2018.pdf Link to comment Share on other sites More sharing options...
writser Posted March 12, 2019 Share Posted March 12, 2019 Yeah. Singer Bangladesh shares have been on a tear this year (and Singer India is up nicely since December as well). I don't have super strong views on whether the subs are cheap or not but there's decent volume in Singer Bangladesh. At this point you pay ~$11 / share for Retail Holdings, for that you get (by my simple calculations): - ~$2 / share in cash. - ~$13 / share in freely tradable shares of Singer Bangladesh / Singer India. - A liability of ~$1 / share of CEO compensation. - ~$5.50 / share in non-remittance shares of Singer Bangladesh. - ~$1.50 / share in dividends held back at Singer Bangladesh because they cannot be paid out to the non-remittance shares. We can have a discussion about the fair value of the last two items (a huge haircut is probably fair) but at a minimum you are buying $14 / share of net assets with a potential $7 / share kicker. And my guess is that the excess cash will be returned to shareholders in a few months, i.e. the pro-forma discount is even juicier. Apart from that, not much has changed. The company has been steadily liquidating and wants to commence the final liquidation in 2018 / 2019. They've been selling some Singer India shares the past few months. The CEO owns a boatload of shares. Company insiders also chair the board of the Bangladesh subsidiary. I like it all. This is now my largest position (though in my case that doesn't mean much - small balls). We haven't heard much from the company the past few months and I think we're at a point where basically any news is good news. If they issue a press release tomorrow: "We gave away all our non-remittance shares and we sold the controlling stakes in our subsidiaries at a 20% discount to market prices" IV is still above the current price .. Then again, maybe I'm just fooling myself by buying Singer BD at a smallish discount. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted March 14, 2019 Share Posted March 14, 2019 @ 278 taka per share I have Singer Bangladesh trading @ 14.3X 2018 EBITDA. While that might seem expensive at first glance, this is a well capitalized, solidly profitable business that grew nearly 24% last year while also paying a 10 taka per share dividend. Link to comment Share on other sites More sharing options...
writser Posted March 15, 2019 Share Posted March 15, 2019 Bought even more. Couldn't help myself. F me. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted March 22, 2019 Share Posted March 22, 2019 RHDGF's controlling stake in Singer Bangladesh has been sold, with the transaction expected to close next month. http://www.retailholdings.com/pressReleases/pressReleasesFile_173.pdf Did the sale happen at an awesomely high price? No, but it does the resolve the non-remittance shares problem. Does this mean that the company is now much closer to liquidation? Yes. Given that RHDGF's only remaining operating asset is Singer India, I think it's very possible the liquidation will complete this year. Link to comment Share on other sites More sharing options...
Tim Eriksen Posted March 22, 2019 Share Posted March 22, 2019 Is the $75 million a 50% discount or am I missing something? Link to comment Share on other sites More sharing options...
bobozou Posted March 22, 2019 Share Posted March 22, 2019 Agreed, the sale price seems like a dramatic discount to market price (even adj 15M remittance shares to $0)? Link to comment Share on other sites More sharing options...
writser Posted March 22, 2019 Share Posted March 22, 2019 Zero value in the non-remittance shares & dividends and selling a controlling stake at a ~18% discount to market value. Was hoping for more. Anyway, this is pretty much my worst case scenario and shares are still up 4% today. I guess I can't complain too much. Is the $75 million a 50% discount or am I missing something? They own 15.33m non-remittance shares (i.e. sales proceeds / dividends can't get out of Bangladesh). These were always going to be problematic. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted March 22, 2019 Share Posted March 22, 2019 Yeah, this isn't a Panglossian outcome (a control premium + full price for the non-remittance shares), but I think it's far from the worse case scenario. Even though NAV is now lower, I think the market's initial reaction* is basically correct since (1) where there was significant uncertainty, there is now something that approaches certainty (2) the ultimate liquidation (and realization of NAV) is now in sight, as opposed to being in some indeterminate, possibly distant, future. All this said, I think the stock should trade within 10% of NAV. * acknowledging that this is an illiquid nano cap with limited volume Link to comment Share on other sites More sharing options...
lathinker Posted March 22, 2019 Share Posted March 22, 2019 I find the outcome disappointing too and would have am really wondering what makes them sell at such a crappy price. It seems like there was only one bidder and maybe they felt under time pressure to monetize. I find the first aspect surprising in world where there is so much dry powder capital looking to be invested. It feels like they might even have done better by selling in the open market. Also, I do not get how the non-remittance shares should be priced at zero... Anyway, a humbling lesson on how important margin of safety is and that many great outcomes can not be taken for granted. Link to comment Share on other sites More sharing options...
Hielko Posted March 22, 2019 Share Posted March 22, 2019 Well, someone pointed out to me that the CEO is entitled to 3.5% of distributions made before 30 April, 2019... so guess he didn't want to miss out on 1.5 million bucks... Link to comment Share on other sites More sharing options...
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