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Retail Holdings Shares Are A Strong Buy For Patient, Long Term Investors, Trading At A 36% Discount To Intrinsic Value

Indelible Capital profile picture
Indelible Capital


  • $31.39 Base Case.
  • $36.16 Upside Case.
  • $22.45 Downside Case.
  • $30.00 probability weighted intrinsic value at 7/4/2017.

I. Executive Summary:

II. Investment Thesis:

Retail Holdings N.V. (OTCPK:RHDGF), hereafter referred to as REHO, is a Curacao based holdco that is trading on the pink sheets.

As of 7/4/2017, REHO’s market capitalization was ~ US $90.0 million. REHO’s main asset is its 54.1% ownership of Sewko Holdings (“Sewko), a Cayman based holding company that ultimately owns, through Singer Asia (“Singer Asia”), a 71.2% equity interest in Singer (Sri Lanka) PCL, a 72.4% equity interest in Singer India Limited and a 59.8% equity interest in Singer Bangladesh Limited, each a publicly listed entity on its respective national stock exchange (see Exhibit 1).

As of 12/31/2016, REHO’s reported NAV was US $28.57 1. Using the same methodology while adjusting for share dispositions and related distributions 2, 3, REHO’s adjusted reported NAV at 7/4/2017 is ~ US $26.90 per share.

However, based on my research to date, I believe that REHO’s reported NAV does not appropriately reflect REHO’s intrinsic value which I estimate, on a probability weighted basis, at ~US $30.00 per share as reflected in Table 1 below:

Table 1: Adjusted Reported NAV per Share vs. Indelible Capital Estimated Intrinsic Value per share at 7/4/2017:

My variant perception is based on the following key considerations:

REHO’s adjusted reported NAV does not reflect my estimate of underlying intrinsic value because it does not consider the following:

First, the present value of REHO’s sublicensed Singer trademark earnings that will continue to accrue to REHO post-liquidation. These earnings, in my opinion, represent close to US $5.50 per share in incremental value over adjusted NAV on a probability weighted basis.

Second, the present value of REHO’s potential recovery from the SVP Seller Notes which represent, in my opinion, close to US $1.00 per share in incremental value over adjusted NAV on a probability weighted basis.

This article was written by

Indelible Capital profile picture
Value Investor that loves to research complex and/or under-followed situations.

Analyst’s Disclosure: I am/we are long RHDGF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Initial Write Up Posted to SumZero 6/21/2017

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Comments (16)

A little more color today MIA but the disaster with the SVP notes is of concern.
I agree the release is very general but that is the MO of this company. Tightly held so little color added to the commentary. 2015SmartInvestor please note my humble view re your post above:
1. SSL cash probably not impacted. Hard to tell present cash at RHDGF as they have sold some stock in operating companies since 6/30/2017 and they also have received some royalties. I would estimate another dividend in the 1st quarter of 2018 probably in the $2-$3 range just from the present cash at hand.
2. The 9.5% stake? Not sure why they did not sell off the whole thing. Probably to justify continuing technical assistance and royalties.
3. The tax impact will not be known until end of the year when the company issues a press release as they have done so for many years. Glad to say there has not been any tax liability in the last few years as the distribution were classified as return of capital and hopefully all or part of this distribution will be classified the same.
4. It looks like the royalty agreement from Singer Asia ( for SSL) to SVP has been transferred with the sale. So SSL will now pay a royalty directly to SVP. It looks like this sets a precedent and as RHDGF sells off the operating companies the royalty arrangement with SVP gets transferred. I do not see an upside of RHDGF keeping 90% of royalties from operating companies as the article from Indelible Capital suggests. Would love to hear the opinion of others as well as from Indelible Capital regarding this point.
5. RHDGF will continue receiving a royalty for technical assistance from SSL although it is not known how much that will be or for how long. In addition they will continue to receive license royalties on the 9.5% stake.
I believe there is still value in this stock even with the recent move up. Holding this stock until it sells off all assets will be very rewarding.
JJ_ profile picture
19 Sep. 2017
It's just a share sale, no impact on cash at SSL. Distributions from RHDGF are tax free. The press release says royalties need to be paid to SVP, so no sublicensing like this article suggests.
RHDGF release is very general. No details so hard to understand impact on cash at SSL, why keep a 9.5% stake, tax impact on distribution, and what actual royalties will be paid by SSL.
Thinley Wangchuk profile picture
Where did you get the chart from Exhibit 1? The 2016 AR (http://bit.ly/2x3IUr5) shows different ownership %.
JJ_ profile picture
13 Sep. 2017
Sale of Singer Sri Lanka stake:


Retail Holdings has an option to sell the remaining 9.5% stake to Hayleys within a 12-15 months timeframe.

Seems like 45-50% of the market cap can (and probably will) be paid out soon.
Greetings Indelible Capital,
Wondering if there is any news on the SVP notes? My research has not found much. Thanks!
Chris DeMuth Jr. profile picture
Great work; thanks for posting this.
Great article. If true re the royalty potential as you call it, this stock just became more valuable. If you figure revenues at $500-$600 million per year and the royalty accumulating to RHDGF of 1-2% on a reduced float of around 4.5 million...well you can do the math. Just wondering if there is a document outlining the base for the royalty payment to SVP. If not then RHDGF needs to address this to their shareholders.
Indelible Capital profile picture

Thanks for taking the time to comment.

One of the documents that I was glad to find during my research was the draft IPO prospectus for SEWKO that was prepared in September 2013 in advance of a potential Singapore listing. This document contains a lot more information than REHO's annual reports for example and is well worth a read. In fact, pages 149 -150 will give you some additional information on the license agreement with SVP. You can find the document at the following link.


Let me know if you have any other questions and I will be pleased to respond.
Thanks Indelible Capital. I do agree with previous posts that RHDGF needs to be more transparent in regards to not only this royalty arrangement but also the status of the SVP notes, and their operating results. This stock is now not so obscure and having financial disclosures twice a year is not enough. Quarterly financial releases and addressing the above points are required.
Indelible Capital profile picture
Hi SmartInvestor2015,

Thanks for the compliment.I think the reason some might have missed the licensing fee potential is because the licensing fee revenue is consolidated at the REHO level. You really have to look at the subs where licensing is an expense to get a sense for how large these payments could become over time.

There are many ways that REHO could monetize the licensing fee revenue once the liquidation process has been completed.One, as you suggest, is for the company to continue collecting the revenue and then distributing it to shareholder as a dividend. In this scenario, I would hope that management would also focus on growing the licensing stream by finding interested parties in countries where they have the rights to sub-license the Singer brand (non sewing obviously) but no presence. China, for example, stands out as having real potential if only because of its size and and because of the many white label manufacturers that have flourished there to feed the export market that might be interested in branding a portion of their production for the domestic market. To this point, I would also argue that REHO's experience with the hire-purchase business model could be monetized alongside the rights but that is simply conjecture.
Thanks for the feedback IC. I should also congratulate you on discovering the Singer licensing fee potential. The other analysts seem to have missed that. Could it be possible that once the company returns all capital back to shareholders RHDGF continues to distribute this fee to shareholders for perpetuity.
Indelible Capital profile picture
Hey SmartInvestor2015,
Thanks for being my first comment! I really appreciate you taking the time to read my rather long write up.
I agree with you, investors should have much better information with regard to the steps REHO's management is taking to maximize any potential recovery from the Notes. After spending some time digging into the matter, I do think there are a number of scenarios where REHO is likely to get a meaningful recovery particularly given the size of the tranche, its nuisance value and the improving financials results at SVP.
Regardless, investors should have more information soon since the Senior Secured debt tranche matured on 6/30/2017 and I have seen no indication of any amendments to extend the maturity date. I will be following this matter closely and suspect the Ares and BlackRock earning releases / calls in early August will be illuminating.
By the way RHDGF owns a number of retail stores, distribution centers, plants. Not sure if you have these at market value. I believe Singer Asia has tried to revalue these assets on the balance sheet but not sure if they are valued properly.
Thank you for your article which I found of great interest. I am a long term shareholder and my estimated value per share is $31 however I am not as confident in the company rescuing any of the SVP notes. One area I agree with you is the lack of information or feedback from the company to its shareholders. I hope articles like yours prompt the company to have more updates. We have been in the dark about these notes for some time.
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