Wednesday, June 19, 2013

Premier Returns...Hopefully

Should anything ever happen to me, readers of this blog wouldn't miss a beat in terms of Stock Ideas. All you would have to do is follow Whopper Investments, who independently writes about many of the same stocks I do. For the second week in a row now, we have come out with new articles about the exact same company. This week's stock: Premier Exhibitions (PRXI).

Neither of us are copying each other; last week, my article came out first. This week, his article is out first but is currently behind a paywall (so I have not read it). But we both like stocks that have seen substantial price erosion despite minimal (if any) business value destruction. If you don't already, be sure to follow him.

Premier Exhibitions is actually a well-followed company within the value blogosphere. I can point you to a previous article I've written here, a recent article by Ragnar here, and a cool series of articles by PlanMaestro that describe the company's problems that required correcting.

Despite Premier having been on my radar all these years, I was never compelled to buy it until now. Two things have changed, however. First, the price of the shares has fallen in a big way. Rumours are abound that partners in a defunct hedge fund run by (an appropriately named) Mark Sellers are winding down their large positions. Shares are down about 25% in just the last month.

The second reason is that the company is now profitable for the first time in years. In its last fiscal year, Premier shows positive net income and free cash flow. So even if the sale of the Titanic assets (reportedly for $189 million; compare that to Premier's $90 million market cap!) falls through or takes even longer, there is at least an underlying business there that is self-sustaining, which protects the downside to some extent.

In fact, I would even argue there's reason to be optimistic about the company's core business. Recent management comments suggest there are growth opportunities that can be explored without risking a whole lot of capital in the process. This is a welcome change from the previous regimes' "If you build it, they will come" mantra that has destroyed so many margins of safeties throughout history.

Disclosure: Author has a long position in shares of PRXI


Anonymous said...

Same thinking here, I've watched the stock for over a year and finally decided to take a starter position at $1.53 the day before the buyback was announced. Hoping to accumulate more next month when Sellers clients actually get their PRXI shares and hopefully dump them on the market in a haphazard fashion!

ASTROman said...

no one seems to be mentioning that FY2013 was the 100yr anniversary of the titanic voyage - this alone boosted revenue associate with titanic exhibitions by more than 60%

any thoughts on this?

Saj Karsan said...

Hi JJ,

I find it gets mentioned quite a bit, actually. Mostly by the company, because it makes current comps more difficult.

ASTROman said...

Hi Saj

Thanks for the reply - do you think this was done on purpose? (as in, PRXI hosted more Titanic venues and less Bodies venues in that Fiscal year)

Saj Karsan said...

Hi JJ,

IIRC, they had indeed planned a push during the 100th anniversary year.

Paul said...

This one is close to hitting a year low again. Any new thoughts, Saj?

Saj Karsan said...

Hi Paul,

I am pretty underwhelmed with those in charge.