Centerpoint CPTX
May 06, 2001 - 8:20pm EST by
2001 2002
Price: 0.90 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 0 P/FCF
Net Debt (in $M): 0 EBIT 0 0

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I think that Centerpoint Corp. (CPTX) is a BUY because the stock trades at 90 cents when there is up to $3.68 cents of value. A more realistic present value of the value per share is around $3.36 per share. The stock trades at .27 of that value, which stands a good chance of being realized within 6 months. That would be a 270% IRR without annualization.

I base the value per share off of the most recent financial statements, which show in Italian Lire, the following assets.

As of 9/30/00 In Italian Lire In USD Per Share

Cash, net of payment of preferred 29.900 billion LIT 13.779 million $2.46
9/8/01 Escrow 7.000 billion LIT 3.226 million $0.58
9/8/07 Escrow 2.375 billion LIT 1.094 million $0.20
Fee Dispute 2.500 million $0.44

Total $3.68

Note: FYI to Lire was fixed to the Euro at a rate of 1936.37 LIT/Euro, so using a Euro price of .8925 Euro/USD yields 2170 LIT/USD.

History: Centerpoint is more or less a cash shell to collect 2 escrow payments from the sale of the operating assets of Moto Guzi, an Italian motorcycle manufacturer. According to the terms of the asset sale, Aprillia, the purchaser, placed a portion of the proceeds in two escrow accounts and will be paid to Centerpoint if no disputes remain at the time the escrow expires. So far there are not any disputes with regard to the escrows. Centerpoint is controlled by several entities, which are in turn controlled by Gianni Bulgari, the jewelry guy. He is pressing for a prompt liquidation of the assets.


A simple reading of the balance sheet shows that there is clear value here and most of it is cash that is already on the books. There is little to no cash burn. The company no longer pays any salaries. The major questions in whether and when shareholders might see any of it. A fair warning to everyone is that this is the second time that this entity has been a cash shell. The last time they bought Moto Guzi, which did not end up being a good investment. In addition to liquidation, they are looking at options to reinvest the money. The major risk here is that they make a dumb investment. I don't think that they are going to find an investment and will liquidate because no one is incented to make an investment and Mark Hauser, the person running CPTX, has his own private equity firm as it is. Should they make an investment, a natural worry is that you will be left holding an illiquid piece of paper in some company that you didn't choose to invest in. Given the success of their last investment, there may be reason to worry. That said, my conversations with him have suggested that he understands what needs to happen for this to work. He says he will only make an acquisition if the company will (or with in 6 months will be) cash flow positive, he can get two market makers to be actively making liquid markets in the stock, and 1 investment bank to write research on the company. In this situation, he would value the shell at a premium to its cash value when making the acquisition. I'm not saying that it will work, but I think he at least understands what needs to be done. I'd prefer the cash.
The logical date to move forward with a liquidation would be in September when they receive the first escrow payment, which I think is likely to be the full amount. The buyers haven't raised any objections, although they might do so at the last minute. In addition, they may be successful in their plan to restructure the final escrow into a smaller amount today. To make calculations simple, I am assuming that they get 10c today. The fee dispute arises from the fees they paid to their financial advisors on the sale of the Moto Guzi Assets. When all is said and done, I think they will settle for half or 22c a share. That's how I get to my $3.36 number. You could easily make other assumptions, including haircutting the first escrow for uncertainty, however, there is still tremendous margin of safety. Too bad its not more liquid.

Note: To find info on this name, you may want to also try the ticker CPTXE…They are late on filing their 10-K for 2000. According to the company, due to the limited staff, they took an extension on their tax return and need tow file that before they can do the 10-K. I'm not saying that the place runs like clockwork, but at least this will keep him busy for a while and away from making a bad investment.


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