Anyways, this is an idea that has been written up by some of my favorite bloggers to track, e.g., here, and here. Shares currently trade around $1,400 (with 19,332 shares outstanding). The idea is fairly simple, CIBL was spun of from LICT late 2007 and has since sold the majority of its operating assets (wireless towers and TV stations), and now consists of the following assets:
| Per Share | Basis | |
| CIBL cash, net of tax (1) | 1,030 | Book |
| TV station sale receivable | 394 | Book |
| ICTC (39.95% stake) (2) | 180 | Market |
| LICT note receivable | 25 | Book |
| Solix (1.36% stake) (3) | 5 | Book |
| Total | 1,633 |
(1) ICTC is consolidated in the financial statements of CIBL. This item represents only CIBL cash, net of ICTC cash.
(2) At cost, the ICTC investment represents $186 per CIBL share.
(3) The historical cost of this investment is disclosed in Note 4 of the 2007 Auditor's Report.
The above figures do not match the press release linked above because they have been updated to reflect the recent repurchase of approximately 10% of the outstanding common stock at $1,300. It is worth noting that the board and management of the company elected to not sell shares as part of the tender. Also worth noting is that Mario Gabelli, founder of GAMCO Investors, is Chairman of the Board and has a 34% stake in the company. Mr. Gabelli also owns large stakes in both ICTC (investee of CIBL) and LICT (former parent of CIBL).
ICTC is a telecommunications company not that dissimilar to the pre-asset-sale CIBL, which Mr. Gabelli has been buying for CIBL. Mr. Gabelli also controls ICTC, through a combination of direct and indirect (through CIBL) investments. I believe it is quite possible that he plans to monetize the assets of ICTC in a similar fashion as CIBL. The posts referenced above provide additional insight into the potential value of this investment.
The Solix investment is also somewhat of a wildcard. While on the books at $100k, there are indications that this investment could be worth significantly more than this. One of the blogs posted above observed that Solix has annual revenues around $91m, so for the 1.36% stake, a value of $600k-$1.2m is probably a conservative range ($32-$64 per CIBL share). Depending on Solix's margins and growth rates etc., a value up to $3m ($160 per CIBL share) is entirely within reason.
The operative word for this investment is safe. Given the current asset base, the upside is not tremendous (I estimate best case maybe 35-40%, but most likely only 20% from the recent price of $1,400). However the potential downside strikes me as very limited. For example, suppose ICTC and Solix are both worth $0, there are still $1,403 of after-tax assets per share to cover the price. ICTC is after all in an extremely tough and declining business. The real question is what management does with the cash. Usually the concern is that management, in one way or another, will set this on fire. In this case, with Mario Gabelli at the helm of capital allocation, this risk seems highly mitigated. More likely, I think having Gabelli manage the capital is potentially a large opportunity. To date, he has consistently acted in a minority-shareholder friendly manner, at both LICT and CIBL. He spun off CIBL which has proved rewarding to LICT shareholders, has monetized assets at attractive valuations, and repurchased shares (both at CIBL and LICT).
Despite the limited upside with the current asset base, the limited downside combined with Gabelli managing the capital were the deciding factors for me. I own shares with a cost that is just about 10% lower, and I have an open order (has been open for maybe two months) to purchase more if shares dip back towards this price.
The Solix investment is also somewhat of a wildcard. While on the books at $100k, there are indications that this investment could be worth significantly more than this. One of the blogs posted above observed that Solix has annual revenues around $91m, so for the 1.36% stake, a value of $600k-$1.2m is probably a conservative range ($32-$64 per CIBL share). Depending on Solix's margins and growth rates etc., a value up to $3m ($160 per CIBL share) is entirely within reason.
The operative word for this investment is safe. Given the current asset base, the upside is not tremendous (I estimate best case maybe 35-40%, but most likely only 20% from the recent price of $1,400). However the potential downside strikes me as very limited. For example, suppose ICTC and Solix are both worth $0, there are still $1,403 of after-tax assets per share to cover the price. ICTC is after all in an extremely tough and declining business. The real question is what management does with the cash. Usually the concern is that management, in one way or another, will set this on fire. In this case, with Mario Gabelli at the helm of capital allocation, this risk seems highly mitigated. More likely, I think having Gabelli manage the capital is potentially a large opportunity. To date, he has consistently acted in a minority-shareholder friendly manner, at both LICT and CIBL. He spun off CIBL which has proved rewarding to LICT shareholders, has monetized assets at attractive valuations, and repurchased shares (both at CIBL and LICT).
Despite the limited upside with the current asset base, the limited downside combined with Gabelli managing the capital were the deciding factors for me. I own shares with a cost that is just about 10% lower, and I have an open order (has been open for maybe two months) to purchase more if shares dip back towards this price.
Disclosures:
(1) Long CIBY with an open order to purchase additional shares
(2) Long LICT and may purchase additional shares at any time
(3) Considering an investment in ICTG, may purchase shares at any time
*Edit: I should have disclosed that I am long BRK, HNFSA, SODI, SHFK, CDU.PT that are also mentioned.
(3) Considering an investment in ICTG, may purchase shares at any time
*Edit: I should have disclosed that I am long BRK, HNFSA, SODI, SHFK, CDU.PT that are also mentioned.
