(Simple equity appreciation)
(Increased share repurchases and related improvement in earnings metrics)
(High dividend and real estate give away)
|12 mo. forecast||$871,311,316|
|Avg. w/ dividend:||18%|
|BV per share (1yr.)||$22.07|
|Year||Delta||BV per share|
|2012 through Q3||2%||$ 19.43|
|BV ps (1 yr.)||$ 23.76|
|Avg. w/ dividend:||26%|
At the current price, the new program has the potential to take back an additional 15% of the remaining shares (about 6 mln.) over and above the ~50% already taken off the market over the last seven years. These are large, aggressive and very share holder friendly actions, the impact of which the average investor may not fully appreciate.
The average retail or passive investor may not always asses the dynamics of these finer points (which have nothing to do with the all-important “sales trends” most obsess on). "Value-oriented" fund managers may be more savvy in this respect but are likely to find the company is simply too small to make a meaningful investment in. However, for a third genus of the species; the “enterprising” and independent value oriented investor “there's gold in them thar' mountains”.
|Year||Number of Shares||decrease|
|2012 through Q3||39480798||-1.30%|
|12 month forecast||36668605||-7.12%|
This taken with the unusually high dividend is something like getting a free derivative hedge for recent buyers. Here are two scenarios:
The "hoped for" scenario of the average short-term investor - the price goes up
Owners of the company’s common shares (unlike senior secured debt holders) have an increase in the value of their holdings, which as marketable securities can be realized at any time. In the meantime, a 5% dividend should assuage the seemingly “long-sufferings” of the impatient.
The less obvious "enterprising" scenario - the price goes down
Anyone who reads the Amvona blog knows that we are not big fans of real estate – we just think an investor shouldn’t pay for something that they will never really own.
However, considering ourselves to be reasonable, we are willing to make exceptions, particularly in the case where the real estate was acquired prior to the 2002-2007 era (or 'the good old days' when Ponzi schemes using real estate was all the rage), and when the price is, well, free as is the case in AM.
American Greetings, in their own GAAP’ish way books their assets at Cost, including their real estate. This becomes especially noteworthy when talking about a 105 year old company.
The undervaluation of the real estate on the balance sheet provides greater security than the casual observer may at first realize. ~9.1 mln. sq. feet of commercial space booked at 188 mln. as of FYE 2011 comes to about $20 per square foot. We are not sure on what planet open warehouse space (let alone office) could be built for less than $50 (land costs aside). If this conclusion is accurate than $188 mln. represents less than 40% of the potential value (and in all likelihood much less). So there may be more than $200 mln. in additional tangible value not represented on the balance sheet.