Guy Gottfried

Guy Gottfried- Rational Investment Group

“Thinking Small: Scouring for Bargains in a Hot Market

Misunderstood, market hasn’t caught on to fundamental change

Undervalued

Strong balance sheet

Skin in the game

HOLLOWAY LODGING RE INVST (PINK:HLREF)  (TSE:HLR.UN) stock was up over 8% after the presentation.

$53M Market Cap, EV $165M, 18.8M shares outstanding  selling at $2.80

Western Canadian hotel portfolio

Loan to Value is below 60%

Serious takeover candidate

Massive insider buying in recent months

It is underfollowed, no calls, no analysts

Historically mismanaged

Suspended dividend in 2009

Just completed a highly dilutive debt recapitalization

Stock was at $150 pre split in mid 2008 (split adjusted)

Debt maturities have been pushed out several years

90% of market value thriving in Western Canada

Vast majority of lodging in oil and gas producing regions

Panic Buying by Insiders

Geosam and Temple own approximately half of the company

Geosam is an activist/control investor of small cap Canadian stocks

Temple is a fellow Canadian hotel REIT

Cap rate of 12.5%   highly attractive valuation given portfolio in thriving region and experiencing significant growth

Catalysts:

Takeover target

Cheap valuation

Sizable platform in Canada

Temple’s stock has been on a great run, while Holloway and the industry have tanked

Upside 60-100%  within a year to a year in half thinks the deal will go through

Just announced a 5% repurchase authorization

Potential for a dividend resumption—40% payout ratio could pay 5% yield

 

Trans World Entertainment Corporation (NASDAQ:TWMC)

The stock was up over 12% today after the presentation.

Retailer, music products

$74M Mkt cap, Enterprise Value $37Million

Profitable net net with stellar balance sheet

Trades at 53% of NWC

EV of 1.7x FCF

Avg cash per share = half of stock price, right now actually above stock price

CEO own over 50% and a good operator

Structurally declining business

Consecutive string of annual losses prior to last year

Underfollowed, no analyst coverage, illiquid due to CEO ownership

 

Shrinking store base from 992 to 390 over 5 year period

Sales from 1471 to $543

Op income 0- to negative to now positive 6M

Sensible operational strategy

De-emphasizing music, adding exposures to electronics (eg apple accessories)

80% of store leases expire by 2013 or company will continue to reduce store base and monetize working capital

CEO Higgins founded company in 1972

Purchased 2.2M in past 3 years

Tried to take company private in 2008 at $5, pulled out when credit markets froze

P/NWC at 53%

It has a hidden asset very few know about, acquired a walgreens building in 2009 ( 60 yr lease, with 25 guarantee, generating $1.6M in rental income per year)  8% cap rate, property worth $20M or .61 cents per share

Adding this rental income would bring NWC down to 47%

EV/share  .51

EV/FCF 1.7x

Trans World does not pay taxes due to NOL’s

Catalysts:

Company goes private

Run off mode and continues to generate cash and sell off store bases

Profitable business, seems to be doing well

Compelling margin of safety, trades at half NWC, Very well run, CEO large owner, Multiple ways to win

Special discount for our  followers, October 4th, 2012  New York City value Investing congress: Save $2,200 Code: N12VW1 Expiration: 6/5/12  VIC Landing Page