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Avingtrans (LSE:AVG) has a very big pile of cash relative to its market capitalisation. Cash, even after paying out £19.4m in a share buyback this month, amounts to £37.1m.
Once it has completed the repurchase of 35% of its shares, market capitalisation will be 18.3m shares x £2 = £36.6m.
(For simplicity, the cash number I’m using assumes none of its £5m May 2016 debt 2016 has been repaid – in reality I expect it to be paid off soon if it has not already been, then cash is around £32m).
On top of the cash Avingtrans has some nice businesses, which are really starting to pick up steam. Admittedly, they are not very profitable, but new contracts might make a majority significant value creators a year or so down the line.
The management seem both capable and interested in shareholder wealth; the share buy-back alone indicates a prioritization of the owners’ wellbeing, rather than empire-building by the Board.
Today I’ll concentrate on the balance sheet and the profit history, leaving the qualitative factors for subsequent Newsletters.
Net Current Asset Value, NCAV
| £’000s | May 2016 (as reported) | May 2016 (adjusted for £19.4m cash used for buy-back) | May 2016 (adjusted for £19.4m cash used for buy-back and inventory reduced by 33%, receivables by 20%) |
| Freehold land + build | 1,861 | 1,861 | 1,861 |
| Inventory | 3,046 | 3,046 | 2,031 |
| Receivables | 7,591 | 7,591 | 6,073 |
| Current tax asset | 85 | 85 | 85 |
| Cash | 56,503 | 37,103 | 37,103 |
| Minus current liabilities | -11,243 | -11,243 | -11,243 |
| Minus non-current liab | -1,383 | -1,383 | -1,383 |
| Net current asset value | 54,599 | 35,199 | 32,666 |
| NCAV per share | £1.783 | ||
| If I add the freehold L+B value | £1.885 |
To be cautious – to build in a margin of safety – I will…….To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
