Saturday, May 5, 2007

Bexil Corp (BXL)

Everyone knows Benjamin Graham and his Net Current Asset Value (NCAV) model, which states, in part, that one of his criteria to buy is that the market captalization must be less than 2/3rds of the Current Assets less total liabilities.

Now these were fairly easy to find in his day, due to market inefficiency and poor disclosure by publicly traded companies, but they are rare now. When we find one, it stands out. I found a company that is close to this measure, trading at .76 of its Net Current Asset Value.

My calculation

Current Assets $38,071,710
Total Liabilities $206,829

Net Current Asset Value $37,864,881
0.76 $28,777,310

Market Cap $28,700,000

The company web site is here:

Now before you start salivating at the prospect of buying a dollars worth of assets at 76 cents on the dollar, read on.

The Good

1) Bexil has $38 million in cash sitting on its balance sheet. Where did this cash come from? Last year it sold its 50% interest in an insurance services company, and paid out a dividend to shareholders for a fraction of that sale.

2) Management seems intent on creating value. They actually have a web site, which is not required so this I view as a positive. Thomas B. Winmill, the President of Bexil, states in his letter posted on the web site:

"Our objective is simple, straightforward, and sharply focused: to increase book value per share over time. We believe that long term stockholders will benefit from a rising book value as market recognition builds and investors come to appreciate Bexil’s intrinsic value as well."

Could this be Berkshire, vintage the 1970's?

The President even has his personal e-mail on the site. Does he read them? We will find out because I will send him an e-mail later today.

3) The company has invested the cash wisely in the interim, it has virtually all of it in a U.S. Treasury Note.

The Bad

1) The company is taking its sweet time looking for an operating business to buy. They sold the 50% stake in the insurance services company last May. The criteria they are looking for are (from the web site)

*A proven track record with demonstrated earning power.

*Sales between $10 million and $50 million.

*A seasoned business with solid customer relations.

*Good return (at least 15%) on equity, little or no debt.

*Solid management must remain. Audited financials required.

*Particularly interested in a “spin-off” from a larger company.

Mr Winmill, in the last year, there have been something like $500 billion in private equity purchases. Is it really that hard to find a business to buy?

3) The company has a shareholder rights plan that would activate if an entity owns more than 10% of the company stock or makes an offer for the company. This plan is almost a waste of time, because more than 50% of the stock is controlled by the Winmill Family or entities that they control.

4) Bexil is nosing around looking for Hospitals to buy in Mississippi. They formed a subsidiary to work on locating assets here. I'm not sure that this is the best business to own to grow book value over time, but I will reserve judgment on that until later.

Later this week I will post on the parent company of Bexil, another intriguing play that is not for the feint of heart.

1 comment:

Mark said...

It will be interesting to see what they do soon.