KHD Humboldt VIC write up

Britt12 recently wrote a VIC write up on KHD Humboldt Wedag, a stock owned by the TDBU portfolio. The portfolio bought KHD at $8.70 and the write up is written up at $9.70 a share. The jist of the valuation follows:

1. $5.95/share in net cash
2. $1.40/share in preferred stock of former parent Mass Financial (ticker: MFCAF)
book value is $2.80/share, we haircut by 50% given underlying liquidity.
3. $3.28/share in royalty interest of iron ore deposit

So you are getting the operating business, slated to do $2.74 a share in EBIT for 2009, for free.

Link to VIC write up

Link to TDBU write up

We valued the royalty interest at only $1.63 per share, due to the use of the long term average selling price. We valued the preferred at $1.95 per share. And our value of net cash minus purchase obligations was 12.63-7.41, for a net net cash position of $5.22.

Our write up got an NAV not including the operating business of $8.80 versus the VIC write up's $10.63. An average of these would approximate where the stock is trading for today. This means we are still essentially getting the operating business for free.