Sunday, June 17, 2012

Value of the century - the Aussie edition

I spent some time last month combing through the bottom end of the ASX market, looking at companies with market cap less than A$300m. I haven't found anything worth investing so far. Then, last night I saw Whopper's post ACGX: value of century? I just couldn't resist and decided to write this up for your amusement.

Details at a glance:
  • Company: Richfield International Limited (ASX: RIS)
  • Market Cap:A$1.6m
  • NACV: A$6.3m, mostly cash!!
  • Business: It operates shipping services in Singapore. It used to operate trucking services years ago.
  • Profitability: Mildly profitable or break-even most of the years.
  • Dividends: Never in the last 8 years.
  • Insider ownership: 72% controlled by the directors
So, here you are. A crazy pile of cash. Buying a share of RIS is buying 25 cents dollar. Or, to flip it around, you are getting an instant 4 bagger. While the value isn't as extreme as Whopper's ACGX, RIS is a listed company with audited accounts and regular filings.  

What's the catch?  

I have serious doubt the company exists mainly for the purpose of running a business. It looks more like the directors' tax shelter. It's basically their family's piggy bank. The most likely end-game I can foresee is, when the business dries out, they will shut down the operations and gradually draws down the cash pile as salaries until it reaches zero. Well, there is no certainty. They may declare a surprise special dividend or announce someone tendering for the company. But I won't bet on it.

(Disclosure: No position)

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