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In September 2016 I observed in a Newsletter that PV Crystalox’s market capitalisation was 160m shares x 16.75p = £26.8m, but the cash on the balance sheet alone was €24.8m or £20.7m, and net current asset value €38.1m or £31.7m.
If we knock off one-third of inventory and one-fifth of receivables, to be really conservative, the NCAV shown in the most recent accounts amounts to €33.6m or £28m (17.5p per share), still more than the MCap in September.
| December 2014, €m | December 2015, €m | June 2016, €m | |
| Current assets excluding cash | |||
| Receivables | 5.3 | 5.7 | 1.4 |
| Inventories | 28.6 | 23.2 | 12.7 |
| Prepaid expenses (mostly deposits for polysilicon feedstock) | 12.4 | 3.4 | 5.0 |
| Totals of current assets excluding cash | 46.3 | 32.3 | 19.1 |
| Deduct all liabilities | |||
| Provisions for ‘Onerous Contracts’ | -15.6 | 0 | 0 |
| Other current liabilities | -6.9 | -7.1 | -5.5 |
| Other long-term liabilities | -0.3 | -0.3 | -0.3 |
| Which totals to NCAV-excluding-cash | 23.5 | 24.9 | 13.3 |
| But we need to add long-term prepaid expenses (mostly payments for Polysilicon). | 5.3 | 5.2 | 0 |
| NCAV-excluding-cash with all prepayments | €28.8 or £20.6m | €30.1 or £24.1m | €13.3 or £11.1m |
| Add Cash | €24.6 | €12.7 | €24.8 |
| NCAV | €53.5 or £42.8m | €42.8 or £34.2m | €38.1 or £31.7m |
| Per share NCAV (not allowing for reducing inventories and receivables) | 26.7p | 21.4p | 19.8p |
The December 2016 decision
Since September the share has risen 41% to 23.7p, giving a market capitalisation of £38m. Thus the shares of this seemingly perpetual loss-maker have moved to significantly more than the NCAV.
If the scenario of limping along with small losses followed by liquidation occurs then the payment to shareholders is likely to be less than £28m (or 17.5p per share), £10m less than current market capitalisation.
Any amount of price above 17.5p is factoring-in optimism about a large arbitration settlement forcing a customer to pay over “a multiple of the Group’s market capitalisation” (interim report to 30th June 2016).
In rough terms, 6.2p/17.5p = 35% of the current share price is the value placed on hope.
Between September and December I lost the backstop…………………………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
