Arden Partners – worth buying some more?

PUBLISHED: 19 Jul 2017 @ 12:03 | Comments (0) |

I bought Arden (LSE:ARDN) for my net current asset value portfolio in September 2015 at 42.2p. There’s been a lot of activity at the company since Luke Johnson took over as Chairman, including the hiring of a new CEO and many senior executives. Now is the time to consider whether the share merits going into my 2017 net current asset value, NCAV, portfolio as well as my 2015 NCAV portfolio.

The shares currently trade at 43p – 45p, giving a market capitalisation of 32.3m shares x £0.45 = £14.5m.

The MCap jumped following the placing of 12.75m shares last month raising £5m. Four of the directors bought shares in the placing. Luke Johnson is now the largest shareholder after buying another 1.25m shares, holding 10.7%.

(Earlier Newsletters on Arden: 1^st – 7^th Sept 2015, 25^th – 29^th Feb 2016, 8^th March 2016, 9^th – 11^th Feb, 13^th March 2017)

Net Current Asset value

The first hurdle a NCAV share has to get over is that its current assets after deducting all liabilities amount to more than the current market capitalisation. This was not too much of a problem for the company in 2015, when it MCap was only £8.1m. Since then it has had loss-making periods, wiping out a good proportion of assets.

The picture is slightly distorted by the £5m placing following the interims. To make the NCAV relevant to the current MCap, with all those new shares now is issue, I’ve added £5m to the total to the NCAV in the table below. This gives NCAV of £10.8m or 33.4p per share.

Unfortunately, because it does not clear the NCAV hurdle I conclude that this company will not be bought at its current price of 45p. But I will keep the shares I already have given that (a) the firm’s business prospects and managerial capability are potentially good (b) I think Luke Johnson has the correct strategy for turning this loss-maker around, (c) I hold for three years minimum if the fundamentals remain reasonably OK.

Net current asset value calculations

£’000s	April 2017	Oct 2016	Oct 2015	Oct 2014	Oct 2013	Oct 2012
Financial assets designated at fair value through P&L (mostly long market-making positions)	1,817	1,489	1,703	2,350	6,756	5,058
Available for sale financial assets	557	552	507	467	479	490
Sold security transactions awaiting settlement at yearend – Arden has not yet been paid cash for shares, etc. it has sold	1,563*	1,409	661	3,4

……………………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.