Argo Group (ARGO). Valued at 40% of Net Working Capital

[FrankJohnstone]

Argo Group Limited

These look extremely cheap on an asset basis ie. cash and net working capital.

http://www.argogrouplimited.com/

"Argo's investment objective is to provide investors with absolute returns in the funds that it manages by investing in, inter alia, fixed income,
special situations, local currencies and interest rate strategies, private equity, real estate, quoted equities, high yield corporate debt and
distressed debt, although not every fund invests in each of these asset classes."

48.1M shares in issue
At the current 15.5p ask price the market cap is £7.5M

At current exchange rate of £1=$1.215

Cash = $9M = 15.4p
Net Working Capital = $23.4M = 40p

Exceptionals in the H1 results caused a stonking $4.8M profit.
I'm assuming ongoing trading at approximately operational break-even. An estimate but looks about right if you strip out the exceptionals.

Two of the directors, the Rialas Brothers hold around 50% of the shares.
I don't really like it when directors hold this much of the company but the shares are so cheap I think its more than factored in.

There is a share buyback programme (up to £2M) currently in operation.
http://www.investegate.co.uk/argo-group ... 00100109L/
They've not been using it much recently probably because there are not many shares available.

[SteMiS]

There is a share buyback programme (up to £2M) currently in operation.
http://www.investegate.co.uk/argo-group ... 00100109L/
They've not been using it much recently probably because there are not many shares available.

With Argo it's hard to know what is going on. Despite announcing a 12 month £2m buy back programme, in the first 5 months they spent...£57k

[FrankJohnstone]

I think possibly the company in a closed period now before the final results and therefore the buyback is on hold?

[SteMiS]

I think possibly the company in a closed period now before the final results and therefore the buyback is on hold?

I think you are probably right but they haven't been in a close period for 5 months...lol. I'm hoping it's just a stalemate between buyers and sellers. No one wants to sell at anything like 16p and Argo are only interested if they can make a big difference to NAV...

I'm a long term holder and although I'm up about 30% with dividends, that's over 5.5 years so a bit disappointing. I'd quite like to bring this to a conclusion as the shares are held in a SIPP account I'm liquidating, so if the they want to offer me 25p a share so I've doubled my money (still a chunky 38% discount to NAV)... You know, if the Rialas brothers are reading

[SteMiS]

I think possibly the company in a closed period now before the final results and therefore the buyback is on hold?

I think you are probably right but they haven't been in a close period for 5 months...lol. I'm hoping it's just a stalemate between buyers and sellers. No one wants to sell at anything like 16p and Argo are only interested if they can make a big difference to NAV...

I'm a long term holder and although I'm up about 30% with dividends, that's over 5.5 years so a bit disappointing. I'd quite like to bring this to a conclusion as the shares are held in a SIPP account I'm liquidating, so if the they want to offer me 25p a share so I've doubled my money (still a chunky 38% discount to NAV)... You know, if the Rialas brothers are reading

Probably nobody left interested. But,

ARGO tender to buy up to 30% of it's shares at between 18p and 26p, compared to NAV of 38p (or 53p if you add back the provision against the receivable from AREOF which ARGO say they expect to recover). Interesting situation. If the tender goes through at 18p, which I expect, then NAV will increase to 47p (or 67p if you add back the provision against the receivable from AREOF). The timing also looks significant. There are some signs that the business is about to turn. TAF AUM has increased, for what seems like the first time in ages, and talk has more bullish feel. They are using up most of their cash on the tender which I can't believe they'd do unless they were pretty confident the Group will trade profitably in the future.

The downside of course is that the Rialas brothers aren't tendering and could therefore be left with 74.8% of the company's shares. That's a smidge below what is needed to de-list and their intention is unclear. In the past they've paid themselves big bonuses and the risk is that the remaining shareholders get stitched up in some way. Admittedly that wouldn't be a good sign to send out to potential investors in their funds (trust us with your money even though we stitched up investors who trusted us with their money in the fund management company). At 30p it would only take £2.5m to take out the minority shareholders. Bid to follow?