Rella Holdings, profitable company trading below net cash

Rella Holding (RELLA.Denmark)

The following is a guest post by a long time reader who wishes to stay anonymous due to various restrictions.

Market Capitalization: 580mln DKK   
Price: 24 DKK per share
Price to net assets value: 0.36x  
Target Price: 48 DKK per share  Upside: 100%
EV/EBIT: Negative -> High cash position.

Investment Case:

Rella Holding S/A is an investment vehicle that owns 57.5% of the shares of Aller Holding S/A, a Scandinavian publisher with an approximate 60% market share of Scandinavian (Finland, Denmark, Norway, Sweden) weekly magazines. Although profitable (EBIT margins have averaged 6% over the past ten years), the prime attraction of this investment is the high discount to net asset value on the balance sheet. Taking into account the large securities & cash position, the real estate as well as small working capital position implies that Rella trades at only 35% of net asset value.  In other words, a liquidation scenario would yield to substantial (>60%) returns. We believe the main risk of the investment case is continued poor capital allocation by the Aller family, who has the majority of voting rights. Given the exceptionally large discount to liquidation value, we believe that there is a low risk of permanent loss of capital. Although no immediate catalysts are in place (with the exception of continued share buy-backs by Rella Holding A/S), we find comfort in buying 1 DKK of assets for 36 cents. We maintain the mantra that if the assets are in place, goods things will happen.

From an asset perspective, the main attraction is the large cash & securities pile sitting on the balance sheet of the holding. From speaking to the CEO of Rella Holding S/A, we believe the assets are primarily invested in corporate and sovereign debt with sufficient liquidity enabling it to be liquidated within a number of days. Next to a small position in A/R and inventory, Aller Holding S/A also has substantial real estate assets.   This includes the new Allerhuset office building (18.000m2) located in Copenhagen, where a number of the magazines are produced:

The shares are very cheap from a net net perspective, but if the business is burning cash, the value can and will disappear. Fortunately, partially due to its high market shares, the magazine business has remained profitable 9 out of the past 10 years.

The magazine business came under pressure in 2009, due to the financial crisis but cost restructuring has helped return the company to average profitability. The magazine business will likely continue to face pressure from increased internet usage and the advent of tablet pc’s, but we believe that given the high market shares in the Scandinavia it is well positioned to survive declines in circulation numbers.

While well positioned, the decline in its main business also poses the main risk to our investment thesis. This is because the family owns the majority of a-shares which gives it full control over future capital allocation decisions.

We believe that in an attempt to secure the future viability of the business the family could make poor use of the hard assets on the balance sheet and replace them with sub-par long shot investments. Indeed, history has shown that the family has already spent a considerable amount of CAPEX over the past years

Overall, while some of the investments can be explained, especially during 2007-2009, with the investment in the aforementioned Allerhuset, other ventures have yet to prove themselves.  Capital allocation based on family driven investments remains the largest risk to the shareholder of Rella. While this is the main risk, we believe the discount to NAV already assumes substantial value destruction and does not take into account any other more positive alternatives.

Poor capital allocation is always a risk when one is an OPMI (outside passive minority investor), but given the sheer size of the discount to NAV we have tried to ascertain why the market is giving us such a seemingly attractive deal.

Reasons for Cheapness:
  1. Obscure Holding Structure 
  2. Low market liquidity/Capitalization
  3. Relatively poor disclosure
  4. Family owned
  5. No voting rights
  6. No immediate catalysts
  7. Balance sheet investment (vs. Institutional Earnings Myopia)Declining Business 
  8. Poor share price performance becoming self-reinforcing
  9. Listed in Europe  

Overall we believe these are all valid reasons for why Rella is so cheap, but given the large and liquid asset base, the risks to prospective shareholders is minimal. At the current share price, Rella is being offered at a price that offers only a miniscule risk of permanent loss of capital with very substantial upside if any asset conversion event occurs in the future (be it M&A, liquidation, higher payout ratios, going private or a more aggressive use of assets).

Disclosure: Author long, Nate no position


  1. 1 DKK of assets for 36 cents.

    1 DKK is less than 36cents should be a dollar for 36 cents.

  2. Yes, I guess it should have actually read 1 DKK of assets for 36 øre. The problem is most readers would have no clue what a øre is, so cents is more readable. Thank you for pointing out the technicality.

  3. haha, how pedantic! no thanks for the write up or anything!

    this looks very interesting, thank you :)

    Have you looked at JZ Capital Partners? It's trading at a massive discount to it's NAV. check out the write up on my blog from December. It's actually got substantially de-risked even from then as they have had a few realisations turning equities to cash.

  4. Hi
    Anyone tried to purchase this via a US brokerage account?
    I tried TD Ameritrade and Interactive Brokers and neither allow purchases of Copenhagen listed stocks without an ADR.

  5. Anon,

    I called my broker Fidelity and it is indeed possible to trade this although with possibly steep fees. To trade directly on a foreign exchange Fidelity has a $50,000 order minimum and then it would cost $32 for the trade plus $50 for a non-DTC settlement, and then $50 to the Danish broker, so $132 to place the trade. On a $50k trade that'd be .26% which isn't bad at all. Of course $50k is more than the typical volume on a given day.

    There was another option which TD Ameritrade or IB might allow but probably not online. According to Fidelity there is a US market maker who has shares of Rella the spread is a bit wider (3.90 to 4.15) but you can trade in a smaller quantity. If you only wanted $5k or $10k worth of Rella you could go this route. The fees for this at Fidelity would be the same $32 and $50 but no $50 to the Danish broker. I purchased a Swiss security this way in the past and it works fine, the caveat is that you need to buy during US market hours because the market maker is American.

    Let me know if you have any questions, hopefully this is helpful. If you do decide to buy it and want to use Fidelity just open an account then call the International Trading Desk. There's no restriction on the types or sizes of accounts that can go the second route. I purchased a relatively small amount of a Swiss company in a Roth IRA without any problems. The key is talking to the right type of broker, Fidelity's International brokers are key.

  6. Hi Nate
    Thanks I'll try that

  7. Just FYI, they came out with their full year results. EBIT was up significantly and FCF came in at approximately 320m DKK. Assuming the 57% stake rella holds, this comes in at ~ 180mln FCF, or ~ 3x FCF. This includes poor results from the financial assets. Aller does expect EBIT to be down y-o-y which is a negative, but given the massive discount to liquid assets, cash flow generation.. valuation makes no sense.

    The author..

  8. Have you given any weight in your analysis to declining weekly magazine market with Rella/Aller?

    Here are might thoughts:

    Weeklies circulation in the Nordic region:

    2006: 5,4 million
    2011: 4,5 million
    Change: -17 %

    Aller's circulation:
    2006: 3,3 million
    2011: 2,7 million
    Change: -20 %

    In that period Rella lost market share. For last three years the overall weekly magazine market has been stable at 4,5 million copies, but Aller has been declining from 2,9 million to 2,7 million copies.

    It is a fact that paper magazines are in trouble with free content from the internet. But I think Aller is in more bigger trouble relative to other magazine producers as its magazine portfolio is more concentrated to "gossip" magazines. I think it really doesn't matter where one gets one's gossip news because nobody(?) really reads them seriously. You know, its nice to read long articles from the Time magazine on bed, and even pay for it, but to know latest gossips from who cheated who, not so much. Thus, if one gets the information for free somewhere, the material one should pay from is in structural disadvantage.

    Additionally, increasing popularity of "iPads" is going to change the "weekly gossip magazine" market even more, in my "gut feeling" opinion, tilting the consumption to "free" or at least to cheaper content in the internet or “magazine-apps”.

    I base my opinion to reading experience. Reading from paper is superior to any "computer screen based product", at least for me. But then again, you have to fight against free content. With "iPads", you can take the pad to bed and sofa and its light and easy to use, the superior attributes paper magazines used to have solely, I expect paper magazines to be even bigger trouble.

    Aller's revenues:
    2006: 3961 mDKK
    2011: 4030 mDKK

    So far Aller has been able to rise prices more than their sales volume have been declining, but how far can it continue? (I don't have a answer – not very long is my gut feeling)

    I know it tries to counter the trend by moving to internet advertising. But can they achieve anything material from it?

    Aller's revenue from internet activities:
    2006:78 mDKK
    2011: 146 mDKK

    They literally have tens of (bought) internet sites across the Nordic region but the business is tiny percentage of the magazine revenues. Ok, the revenues have almost doubled in five years, but its still immaterial to whole business. Given the site portfolio, which is substandard in my opinion, I don't think they are going to replace the declining magazine business anytime soon (ever?) by selling banners.

    Then there is the competition. There are few competitors, who sells the same gossip magazines and internet services as Aller, but in addition they have their own news services and television channels. They can sell their services “multiplatform” (internet, magazines, news, television) and I must say, they have been able to build really good interlinked products (for example from Sanoma), which are really popular. Other companies have been able to do good business in the internet services without “multiplatform” like Almamedia, so it should be possible. How ever, Aller hasn't been very successful with it.

    Given the above mentioned, Aller (Rella) needs to sell at discount, but how big, I don't know at the moment. Yes, the company hasn't been burning cash before, but how long in the future will it continue to be so? All trends are against it and the internet services business is not actually working either. Certainly below net cash it would be interesting, but lately stock has been moving up quite rapidly.

    Currently I'm not making any purchases as I have to research it further to make more informed decisions.

  9. Small mistake in my earlier poist. owned by some swedish company but was previously owned by Almamedia. Sanoma has their own tv-channel called "Nelonen". Aller was interested in tv-busines in early 2000's or something but doesn't own assets from that business currently.

    But the point from my earlier post remains the same.

  10. Hello Epa,

    Thank you for your extensive analysis. Although I live in northern Europe, (NL) I have only spend 6 months of my life in Sweden and can't fully analyze the magazine environment in Scandinavia.

    I agree with the poor business dynamics of Aller Holding. It is however very easy to paint a grim narrative without taking into account the facts. I entered the position at a price to NAV of 35%. This does not take into account any value for the business. Given the weak business envirnoment there is a high probability the family will misallocate future funds to save the heritage. If we assume 30% of the liquid capital will be wasted on negative NPV investments, then the NAV per share is still 48 DKK per share (based on the 2011 numbers) and represents a 50% premium to the current share price. If you take the NAV numbers at face value, there is approximately 100% upside to the current share price. In this case, the family can be tremendously poor capital allocators and you would still be protected from losing capital in the long run. In my numbers I have assumed the magazine business to be worth 0, thus sneakily circumventing your arguments altogether. I will not be chasing this stock fully up until NAV but I believe the shares remain significantly undervalued even after the 50% run up since the write up. The Author

    1. Hello Author,

      I completely agree with you that one can assume that the magazine business is worth zero and still make a good bargain. And still, even with the headwinds, probably 60 % of the Nordic magazine market is worth more than zero.

      (Long Rella)

  11. I like this stock,seems that they're accelerating the buyback from the <35dkk area(now there are 23.5mln shares) and the ridiculous price is probably due to misunderstanding of the balance sheet since the investment is in historial cost...

    For 2012 Rella will have a net profit of Dkk 32Mln and they'll use it to buyback another 1Mln shares,more or less...
    I was thinking if they use debt to do a massive buyback of 20-30% with a good price(<35dkk),would it benefit the shareholders?
    I know equity and cash go down and the interest cost goes high,but after that they can use the dividends to pay the debt in a few years. Does it make sense?

    My main concern is the nature of "other securities and shares" in Aller's balance sheet, do you know more about it?

  12. I have to add that Michael Dell has bought a stake recently(about 8%) through his MSC fund

  13. I have asked Rella about this. I still want more detail on this, but according to the co', its primarily invested in fixed income (majority) and stock mutual funds that can be liquidated within a couple of days.

    The author

    1. could be in german or greek bonds...who knows...

  14. also is the dividend payment from aller guaranteed? if not,a dividend stop means no earnings for rella...

  15. Some action with this stock today. Company's CEO and one member of the board have announced they now own 10 % of the company. Stocks owned by the company have also been canceled.

    1. Well, maybe it should be noted that managements ownership went't above 10 % BECAUSE of the cancellation of the shares - not because they bought more (at least I understood the announcements that way).

  16. correct, remaining shares are 22.88mln now and the Jensen brothers(1 is ceo,the other is board member) own >5% each because of the capital reduction and not by acquisition of shares...

    if rella continues buying at these prices it's gonna add tremendous value for shareholders

  17. Yes, I hope the share price continues to be depressed for a period of a year. With a NAV of 60 DKK per shares, buying back at >30 DKK is great.

    The Author

    1. I hope the price stays low the most time possible...
      problem is Rella has around only Dkk 30mln/year in dividends to buy shares and these low prices are not going to stay too much...

      I wonder if it's a good idea to issue debt for a huge buyback at these prices,for sure equity per share will rise drammatically but future dividends from aller will not be enough to pay debt interest...
      any ideas?

  18. Hello Dominic,

    I guess the most logical solution would be for Aller to buy back the shares of Rella. This would benefit all parties involved. Management/Family would buy back shares of Aller at a vast discount to intrinsic value and the remaining shareholders in Rella would receive a larger stake in the company. Rella could use the current funds on its balance sheet to buy back shares at a ~50% discount to the underlying assets. It should be clear to anyone analyzing the holding company (incl. the family) that the shares are undervalued. Given the poor prospects in the publishing industry the ROI of a buyback would clearly be more attractive.


    The Author

    1. the idea of Aller buying Rella shares is really awesome(since they have huge cash and create value for shareholders), but I'm afraid it's not a legal procedure... I'll try to contact Rella if they have any plan to speed up the process...

  19. I wrote a letter to Rella about the idea of Aller buying Rella's shares,or if they anything better in mind...
    I'll keep you updated

  20. ok so basically they answered me that they do recognize the huge discount on the current share prices and view the share repurchase program as the best option to maximize shareholder value(which is correct)...
    though they don't want to increase debt to buy more shares since they would be too depandable on Aller's future dividends and they don't want to take this risk...

    they replied positively about the idea of Aller buying Rella's shares,mentioning that it would benefit both parties...
    but here comes the weird part: they said that Aller should be the one proposing this idea and not the reverse... I still don't get it...

    maybe I should email Aller about this proposal...

  21. Hey Dominic,

    Writing Aller a letter would be a good idea, they are in the driving seat, because beside the dividend they are in the drivers seat with respect to the liquid assets

  22. yeah I'll try to write a good letter to Aller for this weekend...

    There are some new replies from Rella:
    they stated that recently in Denmark it has been abolished the 10% limit of treasury shares and that Aller is buying the most possible of it's stock on the OTC... I know that the price of Aller on OTC is around Dkk 2bln(which is half book value) and the trasury shares amount at 11%,according to the last annual report...
    so Rella's reply to me was that Aller is concentrating on buying it's own shares and after that they could possibly look at Rella...

    even assuming that Aller will not invest in Rella,I believe this is the best bet I can take on the stock market:
    -we are talking about a solid business(Aller) which has profits from operations and is buying back it's shares at half price;
    -Rella is a very undervalued stock which is channeling all it's income into a good share buyback...

    if both parties insist on buying their own shares there's a phenomenom of "compound buyback": I own a stock(Rella) which is buying back it's stock(creating value) and it's investment(Aller) is buying back it's shares creating value both for Aller itself and Rella...
    even assuming a modest 5% buyback per year from each party should be a very satisfactory result for shareholder value,EVEN assuming that Aller's net profit is 0...

    I'm curious to hear other's points of view...

  23. Nice to see that there is some active shareholders here and that the management is trying to solve the undevaluation situation. So thanks Dominic and Author for your activity!

    I was trying to get my head around how the ownership shares goes if Aller starts to buy Rella's shares. As you mentioned Rella would be owning shares of Aller which would be owning Rella which is owning Aller. From value creation point of view I don't see any problem with it, altough I couldn't get any numbers out if very quickly.

    How ever, as the ownership structure would get even more complicated, valuation of Rella's share would be even more complicated than it is now, thus hurting Rella's owners as the share price probably wouldn't rise to its aproriate levels anytime soon. If the very reason for current undervaluation is complicated ownership structure, is it approriate to complicate it even further?

    I don't know but maybe I think the current strategy good for now...

  24. More complicated or not, what will happen is that when Aller will pay a dividend it will be more significant for Rella shareholders,in other terms Roi increases and that's what an investor looks at...

    Don't worry if financially uneducated people won't grasp the value concepts,although I already invested I hope for a drop in prices to buy more...there are funds which are increasing the stakes and the most notorious fund is MSD Capital,owned by Mr.Dell who is a value investor and knows what he does...

  25. Hi Dominic, I am curious to hear if you ever get a response from Aller. If they are really buying back a significant amount of stock, even if it is their more expensive OTC stock, it would be quite accretive. Lets hope it continues. Regards the Author

  26. nope still no response...

  27. I've noticed something interesting for the upcoming annual report,which it will be released in January 2013 for the period Oct'11-Sep'12...

    From the last balance sheet there's about Dkk 2300mln invested in domestic and foreign(I guess limited mostly in scandinavian countries) bonds and stocks;
    there's a short news that says that last year Aller burnt Dkk 117mln due to the turbolent market and I guess it is correlated with the Omx Copenhagen Index which had a sharp decline in August 2011(

    Now if we look the danish index is now +35% from Sep 2011 close of last accounting year,that means that if the index closes at end of Sep 2012 at these levels there should be at least a 117mln gain from financial investments ONLY: add an expected Dkk 150-170mln Ebit from operations and Aller's total profit could reach nearly the Dkk 300mln zone for the next report: with a 35% dividend payout and Rella's share of 58.2% that's about a Dkk 61mln income for Rella,not bad at all!!

    Meanwhile Rella is buying it's own shares and Aller is doing the same at half the price...definitively a buy till dkk 50/share, target price around 80-85,but it keeps increasing as buyback continues...

  28. Average net financial assets (1000 DKK)
    2005 2,730,288
    2006 2,828,568
    2007 2,659,773
    2008 2,174,247
    2009 1,728,826
    2010 1,903,941
    2011 2,110,470

    Net financial income
    2005 186,675
    2006 142,307
    2007 103,049
    2008 -77,357
    2009 159,224
    2010 155,351
    2011 38,025

    Return on net financial assets
    2005 6.8%
    2006 5.0%
    2007 3.9%
    2008 -3.6%
    2009 9.2%
    2010 8.2%
    2011 1.8%

    Certainly Aller's return on financial assets was lower than in previous years.

    As we know, in 2009 and 2010 markets rebounded and Aller's net financial income was about DKK 155 million. Management didn't give any special insight where the returns came from. Just that the return was "satisfactory" given the market situation.

    September 2011, when Aller's financial year was finished, markets were down again because something "important" was happening in Greece. Or in Italy. Or in where ever. Management reported that because of bad markets financial income was down (@ 38 mln).

    If we assume that in 2009 and 2010 returns were high (155 mln) because the markets were up and that in 2011 return were low (38 mln) because markets were down, certainly it is plausible to think that this year Aller's financial income is up (because markets are up compared to september last year).

    But how much, I don't know. I didn't find straight correlation with financial income and OMX Copenhagen.

    Any way, good point Dominic that there is probably some "extra" income coming also.

    As for the valuation, for example on EV/EBIT basis, Rella's valuation is in no relation to other Nordic media companies (generally multiplyers are above 6).

    North Media A/S has EV/EBIT of about 2, which is the lowest I cand find after Rella. It is a turnaround and mainly distributes free magazines and lives with advertising revenue.

    If Rella would sell at same valuation, there would be about 50 % upside. Rella though is better company and thus it should have even more upside.

  29. Something about the operations instead of the assets.

    Found nice tool where you can track annual circulation numbers by magazine in Finland.

    Some results.

    7 Päivää (Aller's flagship magazine in Finland, local gossips):

    Year Circulation
    2007 263 117
    2010 211 707
    2011 197 607

    Change 07-11: -26 %
    Change 10-11: -7 %

    Katso (mainly tv-guide also some gossips):

    2004 107 498
    2010 33 264
    2011 27 979

    Change 04-11: -74 %
    Change 10-11: -16 %

    7 Päivää, very popular local gossip magazine in Finland, has dropped 25 % from the peak and about 8 % annually since.

    Katso, a tv-guide, was very popular in 2004 but has since been absolutely destroyed, down about 74 % from the peak. Last year drop was 16 %.

    There was only one Aller magazine out of seven which were up last year. But it was a small magazine so it didnt brake the overal trend (down 6 % from last year).

    So depending of the magazine, you have either been destroyed or down alot. Future looks similar, or worse. (But we already knew this from company's own statistict too, but perhaps someone found the details interesting?:)

    It would be nice to get the danish circulation numbers for first half 2012 to see what kind of havoc we can expect for this year. Maybe next month.

    Anyway, the point is, that as most of Aller's cost are fixed, small changes in revenue will change the profits significantly (say 5-10 % decrease in revenues wipes out all the operating profits). So, Aller can change from profitable company to unprofitable company fast.

    But then, the market price is assuming that already. And lot more.

    ps. Porn is good example of what free content can do to an industry. I recall from one document, that one actor said that in early 2000s there were still companies making money, but not any more. Maybe I should dig that deeper if there is something interesting...

  30. good insight epa, for sure in the future operations will slow down and profit will gravitate towards 0 or even less...

    what I like though is that the management is reacting,closing losing businesses and squeezing out the competition ; and given the stock price on Rella it is a good bet even in a dying business since it seems that management is not tolerant to losses...

    you mentioned finland which is a tiny portion of aller's business, probably the sharp circulation n° drop is not of consumer's choice but from aller's decision to disinvest in finland to concentrate on sweden and norway...

    my concern though is that aller is becoming more of a financial institution and there isn't much info about their investments, they say only that the funds are invested on domestic and foreign bonds and stocks, through various portfolio managers with the goal of having returns in line with the market(no speculation)...
    seems now that Aller is like an undervalued index fund,their main profits depend from the % of markets indices and they'll not liquidate the company till the magazine business is over...

  31. I'd have to say that the magazine business could survive to some extent (with an ipad/digital offering), only if it has some kind of added value. A tv-guide is a clear example of a product with almost negative value added vs. a digital and free alternative (Aller does have one of these tv guides, which is doomed). The same is the case for low-end national newspapers (see Telegraaf media group in the Netherlands) who competes directly with websites that source from ANP/Reuters. This doesnt seem to be the case for Aller. Aller is active in specialized niches (Royal gossip, womens magazines, cooking, puzzles) where information content is more difficult to copy without an equal sized staff. Its no the economist, but I'll take what I can get. Anyway, lets not kid ourselves the business is in decline, but given that there is some unique information content to the magazines it might last a while yet.
    Regards the author

  32. here's one of the stocks that Aller holds: Aller owns 11% of this real estate company and the share price lost more than 60% in 1 year

  33. here's the link

  34. Ok, Rella published circulation numbers for H1 2012 and they weren't very encouraging. On year to year basis the drop was 6%. Little bit better than 8 and 7 % from previous years but still declining.

    If revenues decline with same speed (-6%) and costs remains the same for this year, EBIT will be zero (-100 %).

    Historically Rella has been able to rise prices to replace declining circulation but cost control has been more difficult (last year circulation was down but costs were up).

    We'll see...

    (link to announcements:

  35. I guess that's what the conservative guidance was all about. Taking restructuring costs to limit the operational leverage inherent in the business. I guess we will have to see. Financial income should theoretically be v. strong tho.


    The author

  36. Less revenue for sure because they've done a restructuring last year,but it means less costs too... I expect an operational profit of 130-140mln and around 150mln in financials,total is 280-290mln...and Rella will get a good dividend to spend in the buyback...

  37. Aller wants to make public Kate Middleton's photos on swedish and danish magazines... I hope they'll not receive a hefty lawsuit for it...

  38. The problem is that the Aller family are not too fond of the founders of Rella, who created Rella against their will.
    They have no incentive to improve the situation for the Rella shareholders. I think they prefer to keep things status que, and wait until there is a complete capitulation among shareholders in Rella, before they act and purchase Rellas shares in Aller. It is worth noting that very few domestic investors have ventured into the Rella share even as the huge discount is very apparent to many investors.
    This is a waiting game, but the problem (as others comments note) remains, the business is in a state of structural decline.

  39. friday Q3 released: considering the treasury shares there are 22.63mln shares remaining,that makes a book value of 96/share!!

    And expect a boom in financial profits from Aller for the next report, the Danish stock index closed at 500 making it a 42+% in 1 year and they stated on the report that their 2.3billion of financial assets are invested conservatively in line with the market...
    I won't expect 40% gain of course, but 10% net profit is very likely... this means around 230mln of financial income plus the expected operative income of 140-160... that's more than 350mln...

  40. Given that the Danish interest rate is at ca 1.9% Rella could borrow money to buy back Rella stock. It would be a good idea.

  41. I found this article dated 1997 of an interview with an investment company manager whom also talks about Rella and seeing good value in it even at dkk 1.5 bln( double price as today of dkk 0.8bln), with a valuation of 2bln when today the book value is 2.2bln !

    @Anonymous: Months ago I spoke with Rella's CEO about the idea of issuing more debt to purchase more of the own shares: he recognizes the tremendous value in repurchasing own's stock, but he wants to avoid a liquidity risk in case Aller's future dividends are less than expected, so he fixed the maximum debt at dkk 150mln(now it's 132mln)...
    P.S The effective interest rate of Rella's debt is 4%

  42. and Michael Dell's fund increased his stake from 7.5% to 11% of the outstanding shares...

  43. Aller holding in Norway (seems to operate independently) is buying small owner -founder companies and leaving the founder with a part of the business. Some of these could maybe offer some synergys too.

    Maybe a better strategy than investing in art, architecture or internetbusinesses.

  44. Meant maybe a better strategy than reinvesting in the magazines

  45. Annual report is due out on the 19th. Buyback has continued, albeit at a slower pace. Capital markets have been strong so financial assets should be up. If Allers operations are profitable and they have continue to buy back the otc shares then it could be quite interesting. I wonder what the NAV will be. Ill probably do a small update after the numbers.

    The author

  46. Yeah, interesting to see the report and it would be nice to hear your thoughts. My internet broker announced that Nordea, largest bank in the Nordic region, has stopped covering Rella. According to the news their last target price was 68 DKK and there isn't any other analyst firm covering the stock anymore.

  47. book value should be around 97/share now before the next earning announcement...

  48. quite good numbers from today Aller's release! Because of Aller's buyback now Rella owns 60.5% , with current shares of 22.46mln that makes the BV at dkk106/share net of debt... and Aller's cashflow is simply amazing...

  49. What price, in Rella share price equivalent, did Aller pay for the shares they bought back?

  50. I like what i see. I now arrive at an NAV estimate, including the real estate of 82 DKK per share. Quite a bargain still. Given the buybacks of both Rella and Aller this should be quite accretive. One thing I couldnt figure out is the price per rella equivalent share that Aller is proposing to buy-back shares at. They say they are going to pay 8,000 to 15,000 dkk per share. If you multiply this by the number of shares oustanding of Aller (15,408,00), take the 60% stake rella has in Aller and divide this by the shares outstanding of rella, you get two very strange numbers. You get between 3.321dkk and 6.175dkk per share. It is likely an error on my part or the fact that it should be 80dkk and 150dkk per aller share. In that case you get between 33dkk and 62dkk per rella share and that would make a lot sense.

  51. Last year Rella owned 9,327,000 of the 16,028,000 outstanding Aller shares. There are 22,456,816 outstanding Rella shares. Therefore 1 Aller share = 2.4 Rella shares (22.5/9.3). Last year Aller paid dkk92m for 623,000 Aller shares, i.e. dkk148 per Aller share. Therefore it seems to me that Aller paid dkk148/2.4 = dkk62 per Rella share. That is an important premium to the current Rella share price. However even at that price they were still getting more than a 40% discount to their BV of 106dkk.

  52. From talking to the CEO of Rella I figured it out. The price for the buyback is based on the par value of the B-shares. Aller is proposing to buy back B-shares for a Rella share price equivalent of 27dkk to 56dkk. Definitely seems worth it. Hopefully they'll be able to it at the lower end of the range. Even 56dkk would be quite accretive.

    The author

  53. Rella buys Norwegian newspaper very negative for shareholders

  54. Now they bought travel agency from Denmark. More to come according to management. Panic buying in the air?

    I would prefer them to invest in real estate/stocks/bonds rather than these smaller enterprises seemingly without any focused strategy, like was suggested in the original article back in the days. Would be better to change the Aller company in to closed end investment fund like other wealthy families with legacy businessis in Nordic countries have done, rather than waste all the hard earned money in this fashion.

    Still lot of margin of safety with the real estate/investment portfolio, though, but got to stay vigilant how they spend the extra cash.

    Current strategy doesn't look good.

  55. Capital allocation remains the number one risk. We will see what the value is of the real estate and investment portfolio is in january. With the frothy markets this should be up substantialy. FCF should still be quite positive. Hopefully Aller itself was able to buy back some shares OTC. I don't know if we should be paying up to the value of the investment portfolio (maybe net 100 dkk year end?), but a value of 43dkk strikes as me as rather low.

    The Author

  56. Nice turn of events here. Still in?