The company is a consumer and retail branding company, but with a seemingly unrelated investment arm on the side. Losses have been piling up on the branding side, as companies have cut their marketing spend as a result of the recession. As such, Envoy was left with losses as revenues dropped while costs stayed flat. But recently, the company enacted a restructuring plan to reduce fixed costs (e.g. it closed its Dubai office), and therefore the company showed a small operating profit in this unit in the most recent quarter post-restructuring.
What may be a little bit scary for the value investor is the fact that the investment arm of the company appears to operate with a momentum strategy. Mitigating this is the fact that the company appears to hold a number of put options on market indexes which likely reduce the downside risk of the portfolio. However, investors should note that the market has fallen some 10% since the company's latest financial statements, suggesting that Envoy's investing assets may not be as high as they currently appear.
The good news is that management appears willing to take matters into its own hands when it comes to reducing the discount between the stock price and the assets: the company bought back almost 7% of its outstanding shares in the last quarter alone, and has recently announced the intention to repurchase up to 10% more over the next 12 months. Motivating this action may be the fact that the company would be in danger of having to de-list from the NASDAQ if its share price were to spend too much time under the $1 mark. Unfortunately, neither management nor the Board (save for one member) owns a number of shares of any consequence, so there is a risk that capital will not continue to be deployed in an ideal manner for shareholders who buy in at the currently depressed price.
There is no question that the investor is afforded a company on the cheap here. But there also appear to be enough risks to keep many a value investor away. Each investor will have to make up his own mind as to whether this company fits within his strategy.