Okay, I admit to trawling through the list of shares hitting new lows in the Financial Review occasionally. Alright - every weekend. But it's where I find some of my best ideas. As a value investor I'm looking for cheap shares so the rolling year records list is a good place to start.
The following company caught my eye this week as a potential asset play with a time frame for realization of asset value.
Berklee (ASX:BER)
Berklee hit a low of $0.29 this week, down from a high of $0.50 last October.
Berklee Limited "is a manufacturer and distributor of exhaust systems and components for the automotive industry..." or at least it was until recently. Due to deteriorating business conditions it sold its business (for $1) and is now in the process of collecting receivables and selling any remaining assets. The plan is to return the proceeds to shareholders.
As far as I can tell the only remaining major asset is some commercial property in Wendouree. There was a market update from the company this week which indicated the sale of the property would not be finalized until the end of June next year. I presume this was longer than the market anticipated and was the reason for the price drop.
So where is the value? Well, in an announcement in May this year, the company stated it had net assets of $7,076,000 (pro-forma, after business sale) which with 10 million shares on issue amounts to about 70 cents per share. Since then it has been losing money and will obviously continue to incur operating costs until the property is sold and the company is wound up next year.
So the question is how much will be left over for shareholders at the end of the process? I'll leave you to finish off the maths - I can't do everything for you. There are certainly risks involved and the shares are very thinly traded so I'll let you draw your own conclusions.
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