Intro
Spice Private Equity is a Swiss stock market listed investment company focused on global private equity investments. The portfolio is split into the following categories/companies (‘fair market’ value as of end of 2020 in brackets):
- Leon Restaurants ($33m)
- Bravo Brio ($26m)
- G2D Investments ($18m)
- Rimini Street ($13m)
- Legacy Portfolio ($12m)
- Cash and other current assets ($24m)
In sum, the portfolio is valued at ~$126m in the company’s books and with 5.4m shares outstanding this translates into a book value (NAV) of ~$23 per share since there is literally no debt in the company.
A word of caution for Spice Private Equity: trading liquidity is rather limited and might be too low for certain investors (largest shareholder holds around 60% of the shares). Further, although listed in Switzerland, the shares are trading in US dollars.
Valuation
The stock is currently trading at $9.25 – compared with an NAV of $23 at the end of 2020, a huge discount of more than 60% exists. It gets even better though, much better, after the company said in mid April that they signed an agreement to sell its biggest portfolio holding Leon Restaurants for approx. $46m, which is $13m above the book value at year end 2020. Although the sale is not completed yet (expected to close within the coming months), the buyer seems to be motivated and financially capable to fulfil its obligations. Due to the sale of Leon and further price advances of Rimini Street, the NAV per share should have further improved in the recent weeks.
This is a clear asset play, where the market cap of $50m will entirely be backed by the cash balance as soon as the Leon’s sale is completed: Consolidated cash balance last year was $24m as can be seen above, however, the parent company showed only $5m in cash (remainder must sit in their fully consolidated subsidiaries abroad). In a worst case though, we’ll have the $5m of the parent company and receive the $46m in proceeds which amounts to approx. $51m in net cash and hence is slightly above the market cap. In other words, new shareholders get the remaining portfolio for free.
What’s next?
After ‘cleaning up’ a big part of the portfolio, it seems like there are several ways now going forward with different catalysts: One might be to invest the cash proceeds into new investments or distribute the cash to the shareholders. Another one could be a bigger restructuring of the company with either a new focus or, alternatively, a potential buy-out from its largest shareholder – who wouldn’t buy the remaining ~40% of the company that is trading on cash levels? In any case, as long as the management doesn’t completely screw it, shareholders should benefit nicely in the time to come and a fair price may be closer to $15 per share.
Current Price
$9.25 per share
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