ICOCZ,... volume picking up

if 2900 shares on a day like this counts as volume. but the buyers are paying up for it.. folks even paid up to 24 bucks for the paper.. even though its nto paying dividends at this point.. some folks must think they will resume paying dividends fairly soon.. personally i give them one or 2 years for this.. just to resume paying. not to fully pay up for it all.

this name has now been in coverage since december 2004... and in hindsight i would have anticipated a resumption of dividend earlier.. but it hasnt happened. the stock has been extremely difficult to accumulte in this time but not impossible.. but i guess i wouldnt pay up 23 or 24 bucks.. even though intrinsic value hovers around 30..

think there will be a few more quarters where company announces no dividends on the paper. following that, its time to buy the paper from desperate sellers.

Converium Holding AG (CHR)

super duper special situation in the insurance field.

here we got a mid cap reinsurer posting 61 million in quarterly net income and it has a market cap of 1.74 billion. .. i guess a P/E ratio of 7....

and it also trades at 1 x book value.. my type of company.

this is mostly a reinsurer..

this was a spinoff out of Zurich Financial.

some stuff went wrong relating to the years 1997 to 2001 and they had to take a whole lot more reserves.

teh stock cratered drom liek 25 or 30 all the way to 3 bucks. and has been since climbing back to 6 ish levels.

methinks it is not too late yet on this.

recent events.

Q1 earnigns. nice results other than gross premium volume which is not stable yet.

They also hired a new CEO.. the other was just interim .

this is a turnaround.. but after 2/3 years in turnaround mode no longer a high risk turnaround.

i think the new CEO, Inga Beale will finish the turnaround and give shareholder nice rewards over tiem. she comes from GE Insurance Services. this business was sold by GE to Swiss RE. so Inga Beale, left GE as an accomplished executive to be running her own firm, rather than be just one number cruncher within the Swiss RE organization. she has not been on the job for too long but is generally gettting good marks.. the Q1 results just reported didnt have much of her had writing on it..

teh old acting CEO was an actuary primarily charged with stabilizing the performacne of this puppy.. now i guess that the company is stabilized the new CEO will look to grow it responsibly..

the next event ahead will be the ratings review in july 2006.. i think one quarter of nice results will help the ratings review..

much hinges on the ratings. with better ratings they are in a better position to underwrite more gross premium.

with a ROE of around 15% in teh Q1 2006, i guess this is not too shabby..

i,m sure that a long time GE manager will but the special GE touch onto this company in coming quarters and years to come.. i doubt that teh converium crowd will be happy with gross premium shrinkage and 15% ROE..

somethign else is in store here.

this is why this is stilla total turnaround rather than a stabilized situation..

now will add some more perspectives on this down the road. see what so call comps trades at..

but for now all i care is that this company has the potential to turn in 200 millio in net income and has potential to boost that to 300 million over time and all that performacne should it be valued at 1x book value????

of course the investment results matter apart from underwriting discipline.

plus as a reinsurance biz, another question is.... what will the future hold. more storms more other stuff. that is undesirable???

the US business is in runoff... so gotta see what this biz brings... i think teh runoff of it has bee well reserved for.. it looks now that they can release even some reserves. .... typical big bath accountign. when problems occur, write down a lot and reserve into that equity base. when thing go well. release those reesrves and boost earnings. some of this may continue over next 2, 3 years ads runoff continues.

anyway. as an idea for further due diligence, i think it has some potential.

i have been scouting the swiss markeet for quite some time and found nothing really that appealed.

i did liek that idea though.. as it has a bunch of events and catalysts lined up..

in one of he future posts i put up some perspectives of what a turned around comapny such as this in this industry might be worth..

what multiple of book value, and what multiple of earnings.

lately i am gettign a whole lot more interested in teh insurance sector. but which is the play to go.. .. converium looks intersting as a spinoff, castout.. so it rings close to home.


BTW, Martin Ebner, teh swiss turnaround investor owns a big chunk of this..

Bowlin Travel Centers (BWTL)

this is old news i guess.

somehow i posted this story here on the blog but it never got posted.

i short..

2.60 book value, all tangible.

10 x earnings.

7-8 x free cash flow multiple..

earning a good 15 to 20 cents in any given year.

as a spinoff, way underfollowed.

also WAY SMALL. so i guess who cares aobut such nano cap spinoffs these days!!!!

i do.

there does not seem to be a whole lot of risk priced into this name at this juncture.

the comapny is overcapitalized. already sittign on 2 milion in cash. net debt is now 2.2 million. they last 12 months reduced debt by 1 million. way to go. for a nano cap company.

the key to this story is that they have been for 4 or 5 years in the public markets as spinoff and have been spending a full 4 yeras on major capital refurbishment. i think they spend something liek 4 or 5 million in capex during this time period. highway was expanded on their travel center/gas stations. in principle a bullish sign but it meant business interruption for them. they decided to take advantage of this and renovate all their facilities, plus they added one new gast station. going from 11 to 12..

so after huge capex program 2005 was the first clean year with normal capex and normal operations. without major highway projects going on in their backyard.

teh results are not bad. but i guess give them 1 or 2 more years, and the market will catch up with this is teh market gives much for such a nano cap comapny.

if id doesnt withint a 2 year time frame, i would anticipate teh copany to have zero net debt and about 3 bucks in book value. at that point the company should consider a return of capital to shareholders if nothgin better comes to mind with that deleveraaged balance sheet.

now this is a play on the southwestern markets. demographics are favorable and so are the traffic pattern in the area.. figure why anyone expanded the highways from 2 to 3 lanes. not because of the mexican immigrants, or perhaps yes. but certainly because more traffic on the AZ and NM roads.

given that this is a travel center/gas station biz, growing traffic numbers is all i care for a bullish long term thesis on this investmetn. the clean balance sheet helps as well.

the comapny is managed by a family with solid heads on their shoulders and some track record of returning cash to shareholders. i think tehy did some 5 years ago a special dividend to shareholder amounting to liek 4 or 5 bucks per share. .. so its not like the bowlins are greedy bastards. a common risk with micro cap, or nano cap companies. here we seem to have some hardworking folks at work.. unfortunately their comapny just has 12 millio in equity and creates 650K in profit and 1 million in free cash flow.

not somethign to enthuse the general wall street populace, but perhaps in time, people will flock to such companies again with no real risk in their balance sheets etc, and which continue to generate money. right now with a 5 to 6% ROE>. but with an anticipated recap in next 2 years, this ROE could be improved to double digits. in my humble opinion.

up to you do do due diligence on this nano cap..

think it deserves a smallish allocation and tuck in and forget that you own it.

one day you wake up and see that bowlin sells their 100 gas station biz to Lukoil or some Citgo. or some other company looking to expand in US..

by that time i guess it is too late to jump on the bandwagon.

Kaiser Group Holdings (KGHI)

Mittal Steel claim appears to be done in arbitration. against the company..

leeds to adjustment in book value by 7 to 8 million in worst case.

so 71 millin in book value left, divided by 1.79 million shares

turns out to be around 39 bucks or so. in value.

of course the stock just sold off from 40 to 34.5..

because all kghi holders expected teh mittal claim to drive the stock from 40 to 50..

so expectations have evidently been disappointed in this arbitration.

the question is does kghi have a case, if this non appealable arbitration went against the.

those who expected kghi to reap a 30 million windfall benefit sure are disappointed that now they have to pay 4 million.

i myself am underwhelmed.

however if this mittal stuff is considered resolved. then kghi becomes a regular liquidation.

with the benefit that the company is an all cash play..

the second largest shareholder has already voiced his desire to proceed with liquidation. will anyone listen to him?

if they are, we soon will know.

teh mittal arbitration gives fresh wind to bennetts claims taht these executives are not as smart as they think. sure enough. why spend 6/7 million in legal fees over the last 3 years, to end up paying 4 millino buck in the end in arbitration award to mittal. bad logic. the whole thing cost shareholder deerly.

so bennett has a claim to say, over, over, move company to liquidation.

if this were done, i would see them making an 33 to 35 buck liquidation distribution. and this could come rather soon. the liquidaiton value could range around 37 to 39 bucks per share.

the stock now trades at discount, because no formal steps have been taken towards a liquidation.
but it looks fairly unlikely that we will see the 45 or 50 liquidation range taht most people expected as a result of successful mittal arbitration.

so this one went against us, and now the best we can hope for is a plain old liquidation to happen in the next 6 montsh. if a liquidation takes 2 years.. the stock will further sleep. now it really has no catalyst to drive the thing further.

with 71 million equity, and 62 millin market cap, the thing i guess is correctly priced, given the uncertainties i what will happen next.

after all it is not difficult for management to destroy 9 million in value by deciding to appeal an arbitration, by pursuing strategic alternetives or other nonsense.

personally i am against using the 71 million in good cash and wasting it on an aquistion unless that aqquisition is a mightily profitable business.

sceptical that kghi has the above average deal flow knocking at their doors though.