By Deep Value investments @DeepValueInv
Added a 9% portfolio weight to PVCS at 21.68p a share.
This is a solar manufacturer which has just won an arbitration case against a customer who refused to pay up. This has been quite well covered in the Investors Chronicle and elsewhere so only a short post on this.
Their market cap is £34.7m. The arbitration win is worth £30m, less the cost of 22.9m solar wafers the company is supposed to supply. Looking at http://pvinsights.com/ the most that can cost is $0.80 a wafer, lowest $0.60. This gives a net payment of £30-£13.6/£10.2. This means a payment of £16.4 – £19.8m.
The award is supposedly binding – via the ICC. I don’t think there is any appeals procedure.
As at the interims the company held €27.86m worth of cash – or £24.5m.
They also hold €7m of inventories, from the 2016 Annual report some of this is silicon wafer – held at estimated selling cost. Depending on exact specifications I would imagine that could be used to settle the liability of 22.9m wafers the company is supposed to supply.
In addition they have €2.3m accounts receivable / prepaid expenses and a €2.9m payable.
If we net all this out we get to a further £5.6m.
So the valuation comes to £46.5m – £49.9 – less a bit (£2m?) for ongoing costs / wind up costs – so we are at £0.28 to £0.30p a share – or hopefully a 30% – 38% profit.
There might be more in this than that. They have £70.5m worth of plant – written down to £1.7m in the 2016 accounts. Is this really only worth that ? I suspect it could be worth more, but I dont have any real evidence of or for this.
There may be a marginally profitable business here – they made £1.3m EBIT in 2016. I personally would prefer the business wound up.
The company has also lost £88m since 2011. This may create tax loss carry forwards worth something to somebody. I am not an expert in this area at all so it’s only a hypothesis.
Shareholders – Management own 27%, Funds 30%, others the rest so management are not overly dominant and may act rationally in respect of the capital. The outcome of a strategic review is due shortly – hopefully this will act as a positive catalyst.
As ever comments are appreciated.
