Argo Share Discussion Threads

[stemis] 02/8/2011 08:39

Could Argo be starting to wake up?

[davydoo] 28/7/2011 15:39

Duplicate, sorry.

[davydoo] 28/7/2011 15:39

Loving all this attention on unloved Argo. Keep it up.

[qvg] 28/7/2011 15:33

wexboy, i agree i would not buy ashmore at today's price. i bought first half of 2009, at between 150 and 200. i have taken enough profits to pay for my initial investment, but kept some as i still think there is more good growth to come - eg by taking up your suggestion to buy argo.

having seen the high fees they charge, I'm not sure I would buy one of their funds! although 25% discount might tempt me too ...

[wexboy] 28/7/2011 15:16

qvg, yes and no...! - big fan of ashmore, but can never find an opp to buy the stock at a decent price - it's currently @ a 16.6 p/e, and adjusting for cash i estimate market cap is equiv. to abt 6.7% of aum - these nos. are certainly justified right now, but it doesn't give me the margin of safety i need - another stock that will remain on my potential buy list...

actually, i wd lean towards their ashmore global opps ltd. fund - interesting investment proposition, decent nav performance, and a current 18% discount to nav (though i'd prefer to see about 25%) - note i don't own this, but i've come close to pulling the trigger a no. of times, bt each time i was @ my limit on emerging markets allocation or there was another emg mkt stock i preferred to buy -

[qvg] 28/7/2011 12:46

wexboy, thanks for that. are you an Ashmore fan? I am

[stemis] 27/7/2011 11:54

I think the 35p a share is too ambitious. There will be some sort of discount put on their investment in the ARGO Fund. Even Investment Trusts trade at a 20% discount and ARGO Fund is more illiquid so I've used 40%. Valuing the fund management business at 3.75% of AUM gives $16 million. That's 8 x EBITDA when a significant part of the funds are in decline and run off (AGSSF, Real Estate and Capital Partners). I've used 3 x EBITDA.

The trigger for revaluation here is progress on reversing the decline in AUM and attracting new subscriptions. The last figures gave some hope that this has occurred:-

AUM 2008 - $664.4m
2009 H1 - $477.5m
2009 - $439.5m
2010 H1 - $403.1m
2010 - $403.2mHopefully the interims in August will show continuation of this trend.

[qvg] 27/7/2011 11:01

wexboy, my fair value calculation when I purchased a month ago was 34p - always good to see that others have a similar perception of value

[stemis] 27/7/2011 09:22

Good point about the share buybacks. Taking account of those in my analysis adds another penny to my valuation.

I don't think profits are likely to increase much in the short term. Some of the funds are in runoff and its quite a bit further for the others to reach the high watermark and trigger incentive fees (although they should make some savings on legal costs as a result of the termination of the court case). Hence why I've only put a 3 x ebitda value in my analysis.

Don't know why anyone would invest in the Argo Fund directly. Bearing in mind Argo's exposure to the fund (it makes up 57% of NTAV) and the discount, its surely cheaper to get exposure through Argo shares.

[gingerplant] 27/7/2011 07:24

Investment manager Argo Group (LSE: ARGO) isn't one for the faint of heart. Such companies can be hard to get to grips with and when you factor in Argo's Cypriot base and AIM-listing, sensible investors may wish stop reading now.

On the other hand, at 13.9p, the company is valued at just £9.7m, yet has over £7m in cash, net working capital of over £16m, net tangible assets of £16.4m, made a pre-tax profit of £750,000 in the first half and has recently put some potentially troublesome legislation to bed.

So the valuation seems to make little sense -- something which hasn't gone unnoticed as the company has been buying back its own shares for cancellation. Meanwhile, the CEO and Chief Investment Officer own a third of the company between them.

[wexboy] 27/7/2011 05:23

stemis, yep, collecting an 8.6% yield in the meantime is none too shabby...what i really like is the sustainability of this dividend - i do think earnings will increase over time, but regardless of where eps comes out each year, the fact is that the current dividend is covered for the next 19 years based on current cash & investments!

updating my previous analysis, i now come up with a fair value of GBP 36.4 p per argo share - 163% potential upside from current GBP 13.875p share price - the increase from my previous 35p fair value per share is simply down to the share repurchases since by argo - illustrates the power of utilizing surplus cash to retire shares, particularly when shares are purchased at a substantial discount to intrinsic value - so let's raise our glasses to more share repurchase activity!

[stemis] 26/7/2011 15:34

This does seem a ridiculously lowly valued share.

Cash of 9.9p a share.
Investment in Argo Fund of 12.9p a share.
A fund management business which made an EBITDA of 1.6p per share.

Even if you apply a 10% discount to the cash, a 40% discount to the investment in Argo Fund and a 3 x EBITDA multiple to the fund management business, that's still at least 21p a share i.e. 50% upside.

Happy to sit and get 8.5% yield whilst the market figures it out.

[rj allen] 25/7/2011 21:08

Massive volume (over a million shares) today. Something about to happen?

[qvg] 28/6/2011 17:14

my impression is that the market has not noticed that the litigation is now dismissed. So bought a few today

[horndean eagle] 08/6/2011 16:17

My guess is it won't be too long before management decide to take ARGO off the market now that the legal action has been dismissed. Happy for them to buy back shares at a discount to NAV in the meantime.

[squib3] 25/5/2011 07:49

X/D today, expect it to drop a penny or so...

[kimboy2] 12/5/2011 17:43

Does anyone have a reference to where the high water marks are on their funds ?

[squib3] 12/5/2011 09:09

Fantastic news, should take the shackles off the share price :)

[wexboy] 07/5/2011 20:09

if the board sold the fund management business, and liquidated the company, yes i think 35p per share is achievable today - but that requires an event..! for the share price to rise to that level otherwise requires confirmation the lawsuit is totally dead and some real growth in AUM to kickstart a price rise - once that happens the virtuous circle kicks in, remember most private investors will only start buying after the share price rises 50-100%... the timing of this, i've given up on trying to figure that out! meanwhile, the level of cash & investments, the share buyback & dividend, the % share ownership by the board, and the secular growth from emerging markets all make me feel very comfortable with this shareholding

[rlindsey2] 07/5/2011 10:58

Wexboy, that's a very sound approach I would say, gives a good way of measuring how a company could be evaluated. Would you think that 35p is acheivable in the future or would you believe that it would be if Argo could prove themselves by producing consistent profits over the coming years?

[wexboy] 05/5/2011 05:47

this is probably a better link - seems to have all relevant court documents to date:



cannot see a filed amended pleading here, or anywhere else on the web, so it would appear the judge's dismissal is now complete (as of April 30th) as per her order?...pity Argo can't come out with a timely news announcement....

btw my valuation approach to asset management companies is to generally value them at Cash & Investments plus X% of Assets under Management. If you look at asset manager purchases, this X% approach is far more relevant than evaluating revenues, operating margins, eps etc. (although in most cases these can be used to support the valuation anyway) - this makes perfect sense, as the economics of any fund management business can often be changed radically/quickly after a purchase, i.e. a small fund management business that is breaking even, can quickly achieve the same operating margins as the rest of the purchaser's business, for a number of reasons but mostly, to be blunt, by firing people

regular asset managers sell for 2-3% of assets generally, while i like to limit my valuation of alternative/hedge fund managers to 7.5% of AUM (though you can easily find much higher % valuations out there) - this valuation differential conservatively captures the difference between earning 1% and earning 2 & 20% -

anyway, i tweak around these guidelines depending on individual circumstances, for Argo i would limit it to 7.5% * 50% = 3.75% of AUM to reflect mix of assets and current lack of growth in AUM, and would be happy to progressively up the valuation on any consistent growth in AUM

so, let's look at the Argo valuation:

$11.907 mio Cash + $15.563 mio Investments + $403.2 mio AUM * 3.75% = $ 42.590 mio / 1.6524 GBP/USD = GBP 25.775 mio / 73.663 mio shares =

GBP 35p per share

[davydoo] 03/5/2011 11:34

Ive just been looking at this;



Cant see anything filed in the last few days of the month, but unfortunately dont seem to be able to look back any further.

Hopefully some news will be forthcoming this afternoon.

[davydoo] 28/4/2011 14:51

Last trading day for this stock before the 30 days expires, therefore I presume news next week either way

[davydoo] 08/4/2011 11:07

I've only just seen the news from 1st April about the claim being dismissed for a second time, and with a 30 day countdown to make a third claim now underway. This is very encouraging news.