BLMC - Mr. Rudolf

I just had a 30 minute phone call with Will Rudolf, the CEO and President of the Biloxi Marsh Lands Company. He clarified some of the items in the latest quarter that I posted on and explained the issues that impacted my earlier attempts at communication.

I will post an entry a little later on the conversation.

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:

http://www.bexil.com/

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.

BLMC - Earnings Report

I don't want you to think I am obsessed with the company, but they released earnings and I wanted to review them since so few people pay attention to the stock and it is severely underanalyzed. The good thing about obscure stocks is that there are no expectations or guidance so it is impossible to miss expectations or guidance. The report was a little on the bearish side.

Here is a link to the news release on the company web site.

First Quarter 2007


Three items stand out in particular

1) Declining Production

The company reported that the combined gross daily production from 12 wells including those operated by TMR and Manti Jambi, Inc. was approximately 12.5 mmcf with net daily production accruing to the Company of approximately 1.6 mmcf. This was down from 21 mmcf with net daily production accruing to the Company of approximately 2.5 mmcf in the first quarter of 2006. The press release said that several wells run by Meridian Resources were shut in on March 31, 2007, which affected the quarters production. This is odd since the quarter ended on March 31, 2007, so it is hard to understand how a shut in of several wells on the last day of the quarter would hurt things so much. We would expect a normal decline rate on gas wells.

2) Drilling Delay

BLMC's new drilling subsidiary was to spud the first of five wells by March 31, 2007. This has been delayed to May 15, 2007 - 45 days. There was no explanation given for the delay. Maybe it was rig availability or they needed more time to study logs. Decline rates on existing wells are relentless and operators need to drill to keep production even with previous years.

3) No dividend

The company omitted its dividend for the quarter. It had hinted at it last year, and the shut ins and delays in drilling impacted cash flows enough that the company didn't make a payout. The dividend is one of the major attractions of the stock and I hope that it can resume a payout in the second quarter.

The good news is that the stock didn't budge from it perch at $34.00 per share.

It has ocurred to me that the day the wells were shut in was the around the same day I was pestering them with e-mails about setting up a meeting. That could explain why they did not respond.