Lizard
21-01-2011, 02:32 PM
This company got a brief mention last night. I wouldn't normally post on a company this small, for risk of pumping it, but (given some interest expressed) thought I had better provide some back-up info before anyone rushed off to invest!
CLS began it's ASX life as Community Life (CLF), listing in late 2004, raising $20m through issue of shares at $1 to raise funds for "seniors housing" projects. Founder was Theo Baker of tech company "Powerlan" fame. Initial funds were put towards property purchases, but it was soon decided that the model used to create the project was not going to stand up in reality, as costs and income moved away from the inital assumptions. Plenty more detail in the link below:
http://www.uow.edu.au/~/bmartin/dissent/documents/health/communitylife.html
After a period that can only be described as "muddly", the company eventually seemed to decide to sell down most of the land without further development - although they are considering further development on one block, with approval for 59 townhouses. The sales to date have been at a significant premium to cost, helping to retain most of the initial shareholder equity. It appears from quarterly cashflow reports that the most recent sale will have generated another $400k above book value. Four properties remain - 3 of which are being marketed for sale - with total book value of around $5.2m. A small amount of rental is generated from student accommodation on part of the property not for sale.
During the period, the company began using some of their excess cash (initially about $13m) to provide short term secured funding at above market interest rates. About $7m is currently held in these types of loan investments. Interest revenue last year came to $636k from this source.
In 2006, as part of a (short-lived?) relationship with LV Living, the company took a portion of Rewardscorp off LVL's hands, leading to them currently holding 44%. This investment was later fully impaired, although it generated a small income ($67k) last year and it is possible that impairments could be reversed if returns improve. Rewardscorp is a specialist marketing/reward programme operator.
Also acquired in late 2008 was a majority interest in Kinsmen Securities Ltd - a boutique property fund manager. The interest was structured as a 59% preferred shareholding, with management to hold the remaining interest. The investment was relatively small ($500k, with $100k being goodwill) and has since been fully impaired. However revenue shows $725k in funds management fees received last year that may have been generated through this arm.
The majority of last years revenue was generated from a relatively new business created by CLS, known as Asset Technology Group (ATG). This business wholesales ICT equipment to Asia and turned over around $14.6m last year. However, the margins on this business are said to be around 5% - and appear from the break down of accounts to perhaps be closer to nil. This makes it difficult to see the value in this business.
Overall, it is very unclear what CLS is now attempting to do. They seem to continue to muddle along with various interests and income streams. They are extremely taciturn, no longer indulging in more than the most necessary communications to shareholders. No agm presentations and only the commentary in the annual report to really go by.
Since initial listing, shares have fallen by the equivalent of 92.5% (having since been consolidated 10:1). Theo Baker continues to have a strong majority holding and there is little depth to the share register.
However, what was highlighted yesterday was the level of assets held in this company relative to share price - despite the fall in share price, there has only been about a 20% loss of shareholders equity over this period and much of this could be reversed if impairments are later written back.
This leaves the company with a market cap of $3.5m (at 75cps), cash of $4.6m and shareholders equity of $20.5m (no debt). Therefore, an opportunity exists to obtain an unusual level of non-leveraged asset backing - with the risk being wondering whether the company will ever find a way to do something useful with it or whether it might just be gradually frittered away while the company languishes in the dead zone of the ASX!
CLS began it's ASX life as Community Life (CLF), listing in late 2004, raising $20m through issue of shares at $1 to raise funds for "seniors housing" projects. Founder was Theo Baker of tech company "Powerlan" fame. Initial funds were put towards property purchases, but it was soon decided that the model used to create the project was not going to stand up in reality, as costs and income moved away from the inital assumptions. Plenty more detail in the link below:
http://www.uow.edu.au/~/bmartin/dissent/documents/health/communitylife.html
After a period that can only be described as "muddly", the company eventually seemed to decide to sell down most of the land without further development - although they are considering further development on one block, with approval for 59 townhouses. The sales to date have been at a significant premium to cost, helping to retain most of the initial shareholder equity. It appears from quarterly cashflow reports that the most recent sale will have generated another $400k above book value. Four properties remain - 3 of which are being marketed for sale - with total book value of around $5.2m. A small amount of rental is generated from student accommodation on part of the property not for sale.
During the period, the company began using some of their excess cash (initially about $13m) to provide short term secured funding at above market interest rates. About $7m is currently held in these types of loan investments. Interest revenue last year came to $636k from this source.
In 2006, as part of a (short-lived?) relationship with LV Living, the company took a portion of Rewardscorp off LVL's hands, leading to them currently holding 44%. This investment was later fully impaired, although it generated a small income ($67k) last year and it is possible that impairments could be reversed if returns improve. Rewardscorp is a specialist marketing/reward programme operator.
Also acquired in late 2008 was a majority interest in Kinsmen Securities Ltd - a boutique property fund manager. The interest was structured as a 59% preferred shareholding, with management to hold the remaining interest. The investment was relatively small ($500k, with $100k being goodwill) and has since been fully impaired. However revenue shows $725k in funds management fees received last year that may have been generated through this arm.
The majority of last years revenue was generated from a relatively new business created by CLS, known as Asset Technology Group (ATG). This business wholesales ICT equipment to Asia and turned over around $14.6m last year. However, the margins on this business are said to be around 5% - and appear from the break down of accounts to perhaps be closer to nil. This makes it difficult to see the value in this business.
Overall, it is very unclear what CLS is now attempting to do. They seem to continue to muddle along with various interests and income streams. They are extremely taciturn, no longer indulging in more than the most necessary communications to shareholders. No agm presentations and only the commentary in the annual report to really go by.
Since initial listing, shares have fallen by the equivalent of 92.5% (having since been consolidated 10:1). Theo Baker continues to have a strong majority holding and there is little depth to the share register.
However, what was highlighted yesterday was the level of assets held in this company relative to share price - despite the fall in share price, there has only been about a 20% loss of shareholders equity over this period and much of this could be reversed if impairments are later written back.
This leaves the company with a market cap of $3.5m (at 75cps), cash of $4.6m and shareholders equity of $20.5m (no debt). Therefore, an opportunity exists to obtain an unusual level of non-leveraged asset backing - with the risk being wondering whether the company will ever find a way to do something useful with it or whether it might just be gradually frittered away while the company languishes in the dead zone of the ASX!