Rella Holding A/S RELLA
May 22, 2013 - 1:58pm EST by
MSG257
2013 2014
Price: 47.50 EPS $0.00 $0.00
Shares Out. (in M): 22,457 P/E 0.0x 0.0x
Market Cap (in $M): 805 P/FCF 0.0x 0.0x
Net Debt (in $M): 132 EBIT 0 0
TEV ($): 937 TEV/EBIT 0.0x 0.0x

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  • Denmark
  • Publisher
  • Holding Company
  • Discount to Liquidation Value

Description

We are recommending a long position in Rella Holdig A/S with a price target of 78.61 Danish Krones vs. 5/17 share price of 47 Danish Krones for an expected appreciation of 67% (all financials and share prices referred to in this write-up will be in Danish Krones).  The Investment was previously written up by Chewy in 2012.  We note that the shares only trade ~$80k dollars/day so the idea may not be suitable for all funds. 

Rella Holding A/S is a holding company for the B shares of Aller Holding A/S.  Rella holdings represent a 60.5% economic interest in Aller A/S, the leading publisher of weeklies in Scandinavia.  Aller sells ~ 2.5M copies per week with a 60% share of the Scandinavian market.  Aller’s core markets are in secular decline as we expect online/digital media to continue to take share from traditional publishing.  Aller’s average weekly circulation has declined from 3.1M weeklies in 2008 to 2.5M in 2012 (consistently/steadily declining every year).  Despite the decline in weeklies, Aller has been able to grow revenue every year since 2009 (although revenue is down from its 2008 peak), through growth in its “Other activities” (e.g. client publishing, casual gaming, E-trade, etc…) and via small acquisitions.

Despite the negative industry trends we believe an investment in Rella has attractive risk/reward characteristics.  The company has net cash/marketable securities on the balance sheet of $60.83 or a 29% premium to the 5/20 closing price of  $47.  We value the company below based on both NAV and earnings power frameworks. 

 

Rella Ownership in Aller 60.5%  
     
Rella    
Bank Debt  137,502.0  
Other Debt  1,564.0  
   139,066.0  
     
Rella Shares Outstanding  22,457.00  
Capitalized Rella Administrative Expenses  11,857.10 10x Rella Capitalized expenses.
     
Aller Capitalization    
    Comments
Cash  266,847.0  
Securities  2,763,525.0  
   3,030,372.0  
     
Other Monetizable Assets:    
Real Estate  1,242,759.0  
Total Debtors  386,323.0  
Other Securities and Shares  4,971.0  
   1,634,053.0  
     
Debt Like Items:    
Other Debt  394,057.0  
Payable Corporate Tax  44,352.0  
Credit Institutions  1,753.0  
Minority Interest  11,758.0  
Pension Provision  320,532.0  
   772,452.0  
     
     
Aller Net Cash  2,257,920.0  
     
     
Total Liabilities:    
Short Term Debt and Liabilities  1,162,983.0  
Minority Interest  11,758.0  
Other Debt  1,753.0  
Pension Provisions  320,532.0  
     
Total Liabilities  1,497,026.0  
     
Net Monetizable Asset Valuation    
Aller Total Monetizable Assets  4,664,425.0 Aller Cash/securities, real estate, recievables.
Aller Net Monetizable Assets  3,167,399.0 Aller Monetizable assets - Aller total liabilities.
Rella Share of Aller Net Monetizable Assets  1,916,276.40 Rella share of Aller net monetizable assets
Rella Share of Aller Net Monetizable Assets/Share  78.61 Per share value of Rella share of Aller net monetizable assets less rella debt, less Rella capitalized administratitive expenses.
     
Earnings Power Valuation    
Aller Net Debt  2,257,920  
Aller Earnings Power  625,000 5x midpoint of 2013 target Aller target EBIT
   2,882,920  
     
Rella Stake in Aller  1,744,166.60  
Rella Stake In Aller - Rella Liabilities and Adim expenses  1,593,243.50  
Rella value per share  70.95  

 

I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

 
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    Description

    We are recommending a long position in Rella Holdig A/S with a price target of 78.61 Danish Krones vs. 5/17 share price of 47 Danish Krones for an expected appreciation of 67% (all financials and share prices referred to in this write-up will be in Danish Krones).  The Investment was previously written up by Chewy in 2012.  We note that the shares only trade ~$80k dollars/day so the idea may not be suitable for all funds. 

    Rella Holding A/S is a holding company for the B shares of Aller Holding A/S.  Rella holdings represent a 60.5% economic interest in Aller A/S, the leading publisher of weeklies in Scandinavia.  Aller sells ~ 2.5M copies per week with a 60% share of the Scandinavian market.  Aller’s core markets are in secular decline as we expect online/digital media to continue to take share from traditional publishing.  Aller’s average weekly circulation has declined from 3.1M weeklies in 2008 to 2.5M in 2012 (consistently/steadily declining every year).  Despite the decline in weeklies, Aller has been able to grow revenue every year since 2009 (although revenue is down from its 2008 peak), through growth in its “Other activities” (e.g. client publishing, casual gaming, E-trade, etc…) and via small acquisitions.

    Despite the negative industry trends we believe an investment in Rella has attractive risk/reward characteristics.  The company has net cash/marketable securities on the balance sheet of $60.83 or a 29% premium to the 5/20 closing price of  $47.  We value the company below based on both NAV and earnings power frameworks. 

     

    Rella Ownership in Aller 60.5%  
         
    Rella    
    Bank Debt  137,502.0  
    Other Debt  1,564.0  
       139,066.0  
         
    Rella Shares Outstanding  22,457.00  
    Capitalized Rella Administrative Expenses  11,857.10 10x Rella Capitalized expenses.
         
    Aller Capitalization    
        Comments
    Cash  266,847.0  
    Securities  2,763,525.0  
       3,030,372.0  
         
    Other Monetizable Assets:    
    Real Estate  1,242,759.0  
    Total Debtors  386,323.0  
    Other Securities and Shares  4,971.0  
       1,634,053.0  
         
    Debt Like Items:    
    Other Debt  394,057.0  
    Payable Corporate Tax  44,352.0  
    Credit Institutions  1,753.0  
    Minority Interest  11,758.0  
    Pension Provision  320,532.0  
       772,452.0  
         
         
    Aller Net Cash  2,257,920.0  
         
         
    Total Liabilities:    
    Short Term Debt and Liabilities  1,162,983.0  
    Minority Interest  11,758.0  
    Other Debt  1,753.0  
    Pension Provisions  320,532.0  
         
    Total Liabilities  1,497,026.0  
         
    Net Monetizable Asset Valuation    
    Aller Total Monetizable Assets  4,664,425.0 Aller Cash/securities, real estate, recievables.
    Aller Net Monetizable Assets  3,167,399.0 Aller Monetizable assets - Aller total liabilities.
    Rella Share of Aller Net Monetizable Assets  1,916,276.40 Rella share of Aller net monetizable assets
    Rella Share of Aller Net Monetizable Assets/Share  78.61 Per share value of Rella share of Aller net monetizable assets less rella debt, less Rella capitalized administratitive expenses.
         
    Earnings Power Valuation    
    Aller Net Debt  2,257,920  
    Aller Earnings Power  625,000 5x midpoint of 2013 target Aller target EBIT
       2,882,920  
         
    Rella Stake in Aller  1,744,166.60  
    Rella Stake In Aller - Rella Liabilities and Adim expenses  1,593,243.50  
    Rella value per share  70.95  

     

    I do not hold a position of employment, directorship, or consultancy with the issuer.
    I and/or others I advise hold a material investment in the issuer's securities.

    Catalyst

     
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