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Hester

 
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  • Asta Funding: Last of the Net-Nets [View article]
    Qwerty, thanks for the comment. I should of included this in the article and been clearer.

    They are taking some money from the non-GS portfolio and paying off BOM debt. So I guess in this respect it is integrated with the rest of the company and shouldn't be thought of as a seperate call option.

    I really meant GS is a call option in relation to that portfolio's equity and the risk of it. If it disappeared or the recievables started performing terrible the rest of the company wouldn't be affected too much. The downside risk is zero. But for the time being the GS recievables are performing well and it appears, at least to me, that there will be value left.

    It should be noted that ASFI is keeping plenty of their profitability on the non-GS side of the table. A rough calculation shows that the non-GS book value per share, plus dividends, grew from about $9.85 to $10.74 in the last 6 months. So plenty of profitability is being born out on this side of the balance sheet.
    May 27, 2011. 01:19 AM | 1 Like Like |Link to Comment
  • Asta Funding's Stock Price May Soon Reflect Its Reality [View article]
    I don't have a price target but I think it should at least be worth book value plus some value for the option that the Great Seneca portfolio provides cash flow after the debt is paid off. I think it is worth more than $12 ultimately and could be worth a lot more if competition lessons and opportunities open up.

    ASFI historically has sold for over 2 times book historically during better economic times, and that was when they had recourse leverage, so there is large upside if conditions improve. The jury is still out on whether the ROA's that the industry saw in 2003-2007 will ever return to justify 2 times book, but whether they do or they don't .85 times unlevered book with a free call option is too cheap in my opinion.
    Apr 6, 2011. 03:25 PM | Likes Like |Link to Comment
  • Asta Funding's Stock Price May Soon Reflect Its Reality [View article]
    The shelf registration statement is likely just in place in case they ever need to raise capital again, as their business is capital intensive and they need capital to grow. They are a long way from ever needing it though, before they raise debt/equity they have to eat through their massive cash pile.

    To your second question, the great thing about the balance sheet is, over 95% of ASFI's liabilities are nonrecourse debt tied to the Great Seneca receivables portfolio. So, if ASFI wanted they could hand the proverbial keys of the Great Seneca portfolio to debtholders. If they did this they would lose about $87.7 million in receivable assets but they would be cleared of $79.3 million in debt. They would then have a debt to equity ratio of under 2% and still be selling at a meaningful discount to book.

    So although the debt is technically at 2006 levels, unlike in 2006 it is now non recourse and therefore the company is really almost completely unlevered with the free option that the great seneca portfolio value stays above the value of the debt and provides additional cash.
    Apr 4, 2011. 12:33 AM | Likes Like |Link to Comment
  • Asta Funding's Stock Price May Soon Reflect Its Reality [View article]
    I'm long too. Good article, one quibble though, the zero basis portfolio (ZBP) isn't really a hidden asset. It's an income statement figure, future income actually. They rely on the zero basis income to create positive cash flow. It's not like you get the BV of the company plus possibly the hidden asset of the ZBP playing out well. If ZBP stops contributing, earnings would be negative and would erode book. So valuation depends on ZBP and it's not the free call option that the author alludes to.
    Mar 14, 2011. 04:40 PM | 1 Like Like |Link to Comment
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