There was another piece in the Oz this weekend:
Excelsior’s valuation a head scratcher
A follow-up to last weekend’s item on sleepy investment company Excelsior Capital and its huge $100m windfall from selling its electrical cables business that will soon fill the micro-cap’s bank with piles of cash. That’s a lot of hot money looking for a home.
The ASX-listed Excelsior is controlled by Leanne Catelan, who owns 51.33 per cent of the company and is the daughter of the late property data mogul and RP Data founder, Ray Catelan.
Catelan recently sold her Potts Point, Sydney, grand Italianate mansion “Bomera” to steel tycoon Sanjeev Gupta for $34m and now runs Excelsior as a type of listed investment company.
Late last month Excelsior announced a huge deal. It would sell its electrical cable division, called CMI, to IPD Group for as much as $101m – which needs to be put into the context of Excelsior’s total market capitalisation that only sat at $79.75m the day before the sale announcement was made.
Excelsior also owns a small investment portfolio worth $22.98m, of which $17.83m is held in cash. It has access to tax losses of about $32m, which can possibly be used against any capital gains on the CMI sale.Now, this week – and only two weeks after the CMI sale deal – Excelsior put out its latest net tangible asset (NTA) backing for the month of November. And it has many shareholders scratching their heads.
The NTA report has the CMI business valued at only $1.1565 a share. But hold on, say minority shareholders, the company knows the real value of the electricals business because it has an agreement to sell it for $101m ($92.1m in cash upfront, with a further $8.9m to be paid later).
A back-of-the-envelope calculation, based on just the $92.1m in upfront payments, would give the electrical cable business an NTA of $3.175 a share. If earnings hurdles are met and a further $8.9m is handed over, then the full NTA of that business is more like $3.48. Then there is the portion of CMI’s profits that Excelsior should be able to keep before it officially hands over CMI to IPD Group.
Many believe then the real NTA for Excelsior – including its small cash heavy investment portfolio – is between $4.05 and $4.35, against what Excelsior disclosed in its ASX statement of a total NTA of $2.0315 a share.
Sure there could be some capital gains tax payable on the CMI sale, but it is believed that CMI has a book value of about $25m. Throw in $32m of retained tax losses it can possibly offset against that and the tax payable on the sale is probably pretty small.Why Excelsior, run by Catelan and its chairman, Sydney lawyer and former partner at Gilbert & Tobin Danny Herceg, would want to downplay the real or fair value of the company is unclear. No one says you need to overdo it guys, but c’mon, getting closer to fair value would be ideal, wouldn’t it? Or why not give shareholders some parameters of the maximum and minimum NTA for CMI based on unaudited accounts.
Usually, companies love to boast and overplay the value of their company and assets, and Excelsior could be the most sheepish company on the ASX.
Catelan and Herceg did not return calls to Margin Call. They were reportedly last seen hiding under a bushel.
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