David Holding has sniffed out a bargain. This company is trading at cash, which values its four main investments at zero.
As valuations have been trashed across the board in the indiscriminate sell-off of the last six months, we're beginning to see who's been swimming naked as the tide goes out to paraphrase the great Warren Buffett.
One company seemingly wearing a full wet suit, mask, flippers, and oxygen tank is ORA Capital Partners (LSE: ORA). It appears to be trading at slightly less than net cash, much less than net asset value, and with some very interesting looking investments thrown in for free.
ORA is an investment vehicle focussed on technology, resources (including renewable resources), and financial services, as the website shows. It's capitalised at £46.5m at the current mid price of 46.5p, whilst the interims for the six months to the end of July showed a net asset value of £149m and cash of £49m.
Trading worries
The downside is that -- unsurprisingly -- trading doesn’t look too hot as ORA confirmed in January. The company also gave details of a new structure via a new holding company -- which was admitted to AIM yesterday.
ORA was formed almost three and a half years ago raising £66.5m along the way and began trading on AIM in May 2007. As things turned out, that was pretty bad timing, though the share price held up well until January of this year when it went down the chute along with pretty much everything else falling from around 140p to the current level.
Cash in pocket
Its board has a wealth of experience in the creation, growth and management of businesses across the areas in which ORA operates. And, to a large extent, a bet on ORA is an investment in the skills of these people to steer the company through the current maelstrom and shrewdly pick bargains along the way. They seem to have done a good job thus far -- not least in keeping their cash in pocket. That, coupled with the worldwide economic pessimism and the realisation that cash is king, has left ORA in a potentially strong position -- particularly from the perspective of new investors at today's price.
Its four main businesses are:
- Novum Securities Limited, a corporate finance and broking subsidiary;
- Nanoco Tech Public Limited Company, a Manchester based nanotechnology business;
- AIM-listed solar energy company Oxford Advanced Surfaces (LSE: OXA) in which ORA has a 28% holding; and
- AIM-listed Oxeco (LSE: OXE), in which ORA has a 45.25% holding. Oxeco specialises in the development of businesses in technology and science.
Free business
ORA has board representation and experience in each of these businesses. It also has smaller interests in a number of other companies which it considers to be of interest for the future but to which it “does not currently ascribe significant value”.
But the main attraction of these businesses from my point of view is that they're in the price for free for investors buying ORA at today's price.
To paraphrase Warren Buffett again; the first rule of investing is not to lose money and the second is not to forget rule number one. And on that basis, a free business is, well, free.
The more careful investors amongst us may prefer to wait for the next lot of news from ORA before deciding whether or not to take the plunge. But ORA certainly looks like a potential "safety first" investment.
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