We originally wrote about Monarch Services on September 4, 2009 because they had a plan to liquidate the company and appeared to be trading at a discount to the estimated amount of cash that would ultimately be distributed to shareholders. On November 5, Monarch confirmed the sale of their remaining asset, the Girl's Life Plantation Parcel (GLPP) to Baltimore County. Cash proceeds received were the full $624000 agreed upon. Net of fees this worked out to roughly $548000.
We had previously taken a 75% discount to the agreed sale price of $624000 in our estimate of cash proceeds, due to the impaired real estate market and to remain conservative. In light of this favourable development we have revised our estimate of liquidation cash proceeds upwards to $1253000 from $1173000.
Current Market Cap: $971772
Estimated Liquidation Proceeds: $1253000
Return Profile: 28.9%
Disclosure: I own shares in MAHI
SG
Sunday, November 8, 2009
Thursday, November 5, 2009
Walter Schloss Collection - From Valueinvestingpro.com
A collection of 13 articles written by Walter Schloss who has a 5 decade investment record averaging 16% annually and is touted by Warren Buffett as a superinvestor in his 2006 annual report.
Walter Schloss Collection
Walter Schloss Collection
Monday, November 2, 2009
Young Warren Buffett - Writings from 1951 and 1952
Here are articles on 2 companies Warren Buffett wrote about in 1951 and 1952:
GEICO
Western Insurance Company
SG
GEICO
Western Insurance Company
SG
Quest Capital Corp (QC)
(All data from quarterly June 30 2009)
Quest capital is a mortgage finance company in Canada. They focus on short-term (less than 2 years) mortgage lending, and therefore do not have significant exposure to interest rate risk. The investment thesis for this company is quite simple; the company was hit quite hard by the credit-crisis and is now trying to monetize its loan portfolio. They have stopped issuing new loans. The share price is trading at less than a reasonable estimate of what the company will be able to recover through its monetization efforts.
The market cap of QC is $170M or $1.12 per share with 151M shares outstanding. It appears as though this price is much too low; the shares are trading at 55% of adjusted book value.
The company has paid down all its debt and is working on the repayment of its preferred shares. The preferred shares carried a coupon of 13.5% that has now been renegotiated to 12.75% and will be reduced further to 12% on January 1st 2010. Preferred shares have been subtracted in the calculation of book value above.
The company has 49 loans outstanding with total principal of $369.8M. They have taken provision for loan losses of $20M. The company classifies loans as impaired when either principal or payment becomes past due by 90 days. 17 of the 49 (34%) loans outstanding have been deemed impaired as at the end of Q2. Total impaired principal is $162M (44%). However, management’s estimate of fair value of the collateral underlying these impaired loans is $171M.
There is also $6M of loans past due but not yet classified as impaired. For the purpose of this analysis I will assume this amount is already impaired. The $6M appears to be the last of the past due loans.
The nature of the business is such that the balance sheet can be used to determine the value of the business to a purchaser of the company’s common shares.
The majority of the loans outstanding should be partially recoverable, if necessary, through the monetization of collateral. Since the total collateral value is estimated at $171M, which is more then the total value of the impaired loans, it is reasonable to assume that most, if not all, of the principal will eventually be recovered. For this reason, I feel there is a higher probability for a positive outcome.
It seems as though the current price offers an appealing risk-reward scenario. Of course the success of this investment depends on stability in the real-estate market. Even if a relapse were to occur, it is not certain that a purchaser of the shares at these prices would suffer a permanent impairment of capital. The situation as it is along with the fact that the CEO is purchasing shares seems to provide a sufficient margin of safety to warrant an investment of capital in this situation as part of a diversified portfolio.
Disclosure: I own shares in QC. This is not a recommendation to purchase or sell securities.
Quest capital is a mortgage finance company in Canada. They focus on short-term (less than 2 years) mortgage lending, and therefore do not have significant exposure to interest rate risk. The investment thesis for this company is quite simple; the company was hit quite hard by the credit-crisis and is now trying to monetize its loan portfolio. They have stopped issuing new loans. The share price is trading at less than a reasonable estimate of what the company will be able to recover through its monetization efforts.
The market cap of QC is $170M or $1.12 per share with 151M shares outstanding. It appears as though this price is much too low; the shares are trading at 55% of adjusted book value.
The company has paid down all its debt and is working on the repayment of its preferred shares. The preferred shares carried a coupon of 13.5% that has now been renegotiated to 12.75% and will be reduced further to 12% on January 1st 2010. Preferred shares have been subtracted in the calculation of book value above.
The company has 49 loans outstanding with total principal of $369.8M. They have taken provision for loan losses of $20M. The company classifies loans as impaired when either principal or payment becomes past due by 90 days. 17 of the 49 (34%) loans outstanding have been deemed impaired as at the end of Q2. Total impaired principal is $162M (44%). However, management’s estimate of fair value of the collateral underlying these impaired loans is $171M.
There is also $6M of loans past due but not yet classified as impaired. For the purpose of this analysis I will assume this amount is already impaired. The $6M appears to be the last of the past due loans.
The nature of the business is such that the balance sheet can be used to determine the value of the business to a purchaser of the company’s common shares.
The majority of the loans outstanding should be partially recoverable, if necessary, through the monetization of collateral. Since the total collateral value is estimated at $171M, which is more then the total value of the impaired loans, it is reasonable to assume that most, if not all, of the principal will eventually be recovered. For this reason, I feel there is a higher probability for a positive outcome.
It seems as though the current price offers an appealing risk-reward scenario. Of course the success of this investment depends on stability in the real-estate market. Even if a relapse were to occur, it is not certain that a purchaser of the shares at these prices would suffer a permanent impairment of capital. The situation as it is along with the fact that the CEO is purchasing shares seems to provide a sufficient margin of safety to warrant an investment of capital in this situation as part of a diversified portfolio.
Disclosure: I own shares in QC. This is not a recommendation to purchase or sell securities.
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