I screened with Finviz for companies that trade with a Price/Cash ratio of less than 1 and checked if the companies had any debt. I then calculated the net cash (cash - debt). I believe that stocks that trade below their net cash levels are potential takeover candidates or "going private" candidates. I wrote part I of an article titled "5 Stocks Trading Below Net Cash" on August 18, part II on August 19, part III on August 26, part IV on August 27, part V on August 27, part VI on August 28, part VII on September 2 and part VIII on September 3. In this article, I will feature one China-based company and four U.S.-based companies:
1. China Finance Online (JRJC) is a technology-driven, user-focused market leader in China in providing vertically integrated financial information and services including news, data, analytics, securities investment advisory and brokerage-related services. Through its flagship portal sites, jrj.com and stockstar.com, the company offers basic software and information services to individual investors that integrates financial and listed-company data, information and analytics from multiple sources. Leveraging on its robust internet capabilities and registered user base, China Finance Online is developing securities investment advisory and over time wealth management services. Through its subsidiary, Genius, the company provides financial database and analytics to institutional customers including domestic brokerages and investment firms. Through its subsidiary, Daily Growth, the company provides securities brokerage services in Hong Kong.
The company reported second-quarter financial results on September 13, with the following highlights:
|Net loss||$2.6 million|
|Net Cash||$59.5 million|
|Shares outstanding||21.8 million|
|Net cash per share||$2.73|
Mr. Zhiwei Zhao, Chairman and CEO of China Finance Online, commented on September 13:
Amidst the persistent European sovereign debt crisis and a slowing PRC domestic economy, the Chinese stock market continued its downward trend during the second quarter of 2012. China's GDP growth dipped below 8% for the first time in twelve consecutive quarters. The Shanghai A-Share index breached its three-year lows and investor sentiment remains fragile. A tough macroeconomic and market environment poses substantial challenges for our ongoing operations.
In the face of these challenges, we are implementing additional cost-cutting initiatives to increase efficiency and improve operational performance. We continue to expand the influence and technical capabilities of our flagship financial media platforms for further internet applications. With improving internet capabilities and consistent user traffic, we are also looking to upgrade our advertising business.
Meanwhile, we continue to proceed with operational transition and we have launched trial services for our securities investment advisory operations during the third quarter. In the third quarter of 2012, one of our PRC affiliates obtained regulatory approval to distribute mutual funds. The newly granted mutual fund license will allow us to diversify our product portfolio and help expand our customer base. However, given the trying external environment, it will take some time for such new segments to generate revenues.In the midst of a slowing economy and weak stock markets, we are proactively laying the foundation for future growth through product innovation, resource consolidation and streamlining our corporate structure. Our strategic vision remains to become a leading service provider of informational and other value-added financial products for Chinese investors through leveraging on our proven strength in vertically integrated market intelligence and our substantial experience in financial services.
The stock is currently trading at a 53% discount to its net cash per share value. I am not expecting the company to be profitable for the full-year 2012 based on the company's outlook.
2. Parke Bank (PKBK) is a full service commercial bank, with an emphasis on providing personal and business financial services to individuals and small-sized businesses primarily in Gloucester, Atlantic, and Cape May counties in New Jersey, and Philadelphia, and surrounding counties in Pennsylvania.
The company reported the second-quarter financial results on July 27 with the following highlights:
|Net income||$1.6 million|
|Net Cash||$75.1 million|
|Shares outstanding||5.4 million|
|Net cash per share||$13.91|
Vito S. Pantilione, President and Chief Executive Officer of Parke Bancorp and Parke Bank, provided the following statement on July 27:
We are pleased to report that Parke Bank continues to generate strong core earnings, with careful control of our expenses combined with lower funding costs. Challenges in the real estate market persist in the nation and the region. As we move through the difficult legal system to obtain ownership of a foreclosed property increased costs continue to be incurred. We have seen an increase in activity in the sale of troubled real estate therefore, once we obtain the property we will continue to execute on a strategy to dispose of the real estate and improve our balance sheet. Continued low loan interest rates have put additional pressure on our Net Interest Margin, which will continue and possibly worsen over the next 12 to 18 months. Our small business lending remains strong; however, the competition for quality new loans is increasing. Parke Bank remains focused on building a strong bank that meets the many challenges of the current economic environment while continuing to generate a strong return on investment to our shareholders.
The stock is currently trading at a 60% discount to its net cash per share value. I am expecting the company to be profitable for full-year 2012. There have been two insider buy transactions and four insider sell transactions this year. The stock was trading as high as $16 in 2006.
3. Maxygen (MAXY) is a biotechnology company that has historically focused on the discovery and development of improved next-generation protein pharmaceuticals for the treatment of disease and serious medical conditions. Maxygen continues to retain all rights to its MAXY-G34 product candidate, a next-generation pegylated, granulocyte colony stimulating factor, or G-CSF, for the treatment of chemotherapy-induced neutropenia and acute radiation syndrome.
The company reported second-quarter financial results on August 7, with the following highlights:
|Net income||$27.1 million|
|Cash distribution||$100.0 million|
|Net cash||$82.7 million|
|Shares outstanding||27.8 million|
|Net cash per share||$2.97|
Total operating expenses from continuing operations in the second quarter of 2012 were $2.4 million.
Over the past several years, Maxygen has focused its efforts on maximizing stockholder value through sales, distributions and other arrangements involving the company's various assets. The sale of Maxygen's interests in Perseid to Astellas (OTCPK:ALPMF) in May 2011, the company's receipt of the final $30.0 million payment from Bayer (OTCPK:BAYZF) in May 2012, and the planned distribution of approximately $100.0 million in cash to its stockholders have all been part of this multi-year strategic process.
Maxygen continues to retain all rights to its MAXY-G34 product candidate, a next-generation pegylated, granulocyte colony stimulating factor, or G-CSF, for the treatment of chemotherapy-induced neutropenia and acute radiation syndrome, and the company continues to focus on creating value from this program for its stockholders, principally through a sale or other transaction involving the program. Maxygen has no current plans to independently continue the further development of this product candidate for either indication and, to date, the company has not been successful in identifying any potential transaction for the MAXY-G34 program. Accordingly, there can be no assurances the company will be successful in identifying and consummating any such transaction in the future or be able to realize any value from this program.
Maxygen also continues to evaluate all other potential strategic options for the company, including a merger, reverse merger, sale, wind-down, liquidation, dissolution or other strategic transaction. Maxygen expects to evaluate and consider additional distributions to its stockholders of a portion of the company's cash resources in excess of its limited future operational requirements, amounts the company considers appropriate to pursue its on-going strategic evaluation and adequate reserves for potential future liabilities. Such distributions may be accomplished through cash dividends, stock repurchases or other mechanisms and may be fully or partially taxable depending on the circumstances of such distribution. To date, Maxygen has not been successful in identifying any strategic transaction for the company and there can be no assurances the company will be successful in identifying and consummating any such transaction in the future, that it will make any additional cash distributions to its stockholders or that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stockholder value.
The stock is currently trading at a 11% discount to its net cash per share value. I am expecting the company to use cash for operations of approximately $10 million during full-year 2012. It is unclear currently when the company will report any future revenue.
4. Qualstar (QBAK) is a diversified electronics manufacturer specializing in data storage and power supplies. The company's products are known throughout the world for high quality and simply reliable designs that provide years of trouble-free service.
The company reported full-fiscal-year 2012, which ended June 30, financial results on August 16, with the following highlights:
|Net loss||$4.1 million|
|Net cash||$20.9 million|
|Shares outstanding||12.253 million|
|Net cash per share||$1.71|
Larry Firestone, President and CEO, commented on August 16:
Fiscal 2012 was a challenging year, punctuated by the successful defense of the proxy contest at year-end. Despite this, we have begun to execute on our newly-announced strategic initiatives that include restructuring for greater efficiency, broadening our product portfolio and expanding our sales channels to address additional market opportunities. As an organization, we are committed to taking the necessary steps to drive profitable growth long-term and return value to our shareholders.
The stock is currently trading at a 15% discount to its net cash per share value. I am not expecting the company to be profitable for the full calendar year 2012 based on the company's outlook. There have been 25 insider buy transactions and two insider sell transactions this year. The stock was trading as high as $5.5 in 2004.
5. First Marblehead Corporation (FMD) helps meet the need for education financing by offering national and regional financial institutions and educational institutions the Monogram platform, an integrated suite of design, implementation and credit risk management services for private label, customizable private education loan programs.
The company reported full-fiscal-year 2012, which ended June 30, financial results on August 14, with the following highlights:
|Net income||$1.1 billion|
|Net cash||$133.5 million|
|Shares outstanding||102.1 million|
|Net cash per share||$1.31|
|Book value||$2.23 per share|
|Tangible book value||$1.83 per share|
For the fiscal year ended June 30, 2012, the company reported a net loss from continuing operations of $38.9 million. The company's net income for the fiscal year ended June 30, 2012 was $1.1 billion, or $9.96 per fully diluted share, which includes the net income from discontinued operations of $1.14 billion.
The stock is currently trading at a 20% discount to its net cash per share value. I am not expecting the company's continuing operations to be profitable for the full calendar year 2012 based on the first six months performance. The stock was trading as high as $55 in 2007.