A Letter to Avangardco (AVGR:LN)

Tags

accretion, activist investors, Avangardco, Cal-Maine Foods, corporate governance, eggs, enhanced EPS/NAV, free cash flow, intrinsic value, Iryna Marchenko, lowest cost producer, M&A, majority control, minorities, Nataliya Vasylyuk, Oleg Bakhmatyuk, P/E ratio, P/S Ratio, Return on Equity, risk aversion, share buyback, technical analysis, Ukraine, Ukrlandfarming

Here’s a copy of a recent letter to the CEO & CFO of Avangardco.

Note I’ve updated all figures, as appropriate, to reflect today’s $10.50 closing price – otherwise, the text remains unchanged. For reference, I’ll also include Word copies of the original below. The letter speaks for itself, and is also a great reminder to readers of AVGR‘s extraordinarily cheap valuation! So, without further ado:

‘November 05, 2012

FAO:

Nataliya Vasylyuk, CEO, &

Iryna Marchenko, CFO

Avangardco IPL

121 V Prospect Peremohy

Kyiv, 03115

Ukraine

Dear Nataliya & Iryna,

Advertisement

How About Another Catalyst? (Part X)

Tags

Adrian Williams, Alphameric, alternative assets, Argo Group, asset managers, Avangardco, Bear Stearns, binary outcomes, capital expenditure, catalyst, delisting risk, DM plc, Dresden, emerging markets, Expected Value, Fair Value, Fortress Investment Group, Gagfah, government regulation, intrinsic value, IRR, Joe Lewis, litigation, major sale, Net LTV, P/E ratio, P/S Ratio, risk aversion, risk management, share buyback, share repurchase, takeover offers, Timeweave

Continued from here, & here’s the first post in the series.

vi) Litigation/Regulation is the final catalyst on my list. It’s also, without a doubt, the most difficult to exploit & to write about (note I’ve tackled this series in reverse order)! In fact, if it doesn’t (immediately) appeal to you, I might perhaps discourage you from ever bothering with this catalyst? To some extent it suffers from the same issues/perceptions I highlighted with v) the Major Sale catalyst.

First, most litigation/regulation risk/events are simply part & parcel of normal corporate operating activity. For example, certain sectors are almost permanently marked down due to their increased risk level (perhaps something politicians like to mouth off about?!). These risks usually aren’t of any fresh/major significance to a company’s business model or valuation, and/or they’re routinely priced in anyway – they are not catalysts.

But occasionally a real game changer comes along… A lawsuit, or a regulatory change/threat/action/approval, that could prompt a major change in a company’s future intrinsic value. It may also cause a rapid/significant adjustment in the company’s current market cap. So how exactly do we separate out & identify such a catalyst vs. the merely hum-drum? A similar approach, like v), seems sensible – something like:

A Universe of Stocks…

Tags

activist investors, Amberley Group, blind stock valuation, Brookwell Ltd, Brulines Group, catalyst, Ennismore, GemPAY, HTEC, Jewel in the Crown, P/S Ratio, Progressive Asset Mgmnt, Robert Goddard, segment/divisional reporting, Stephen McLeod, Universe Group, Vianet Group

Continued from here, and here. So, from a whole universe of stocks, what’s my bloody blind stock? Universe. No, seriously mate, what is it..? Universe! OK, you’re taking the piss, what the hell’s your blind stock?! Universe..! It’s Universe Group plc (UNG:LN) 🙂

Its core operating sub. (HTEC) has over 30 yrs of experience in providing Loyalty, Payment & Forecourt Technology Solutions to petrol retailers, primarily in the UK & Ireland. This is a specialized & attractive niche, with many of the major oil companies & UK supermarkets as customers. Universe reports in three functional segments: i) Petrol Forecourt Solutions (PFS): POS & payment systems, business analytics, and automatic number plate recognition (APNR) software, ii) Universe Data Services (UDS): Loyalty schemes, and APNR software, and iii) Contract Electronic Manufacturing (CEM): Contract design, development, manufacturing & repair services. Let’s jump straight into some total company figures¹ (for 2007-10):

Asset Managers – Another Look at Valuation

Tags

% of AUM, activist investors, alternative assets, asset managers, catalyst, earnings growth, Goldman Sachs, hedge funds, P/B Ratio, P/E ratio, P/S Ratio, Price/Sales, REIT/MLP sector, short sellers, takeover offers

Continued from here. I was glad to see some comments/debate come back to me re my previous asset manager valuation statement:

‘Obviously each manager has their own unique story/valuation, but big picture these metrics really work: 2.25%-3.25% of AUM for traditional managers and 7.5%+ of AUM for alternative managers.‘

‘Big picture‘, of course, just means on average & over time, there will be plenty of exceptions to the rule..! Actually, readers were really just (smartly) anticipating something I wanted to highlight in my Part 2: I’ve highlighted the benefits/logic of using a % of AUM valuation approach, but how about related risks & questions? Like: