Investment Thesis
I believe that Vulcan International (OTCPK:VULC) is presenting investors with an attractive opportunity even despite having one of the most obscure corporate setups out there in the ‘public’ OTC market.
The company is deregistered from the SEC and forces shareholders to sign a non-disclosure agreement (NDA) when they want to see VULC’s financials. The family that still owns a significant stake in the business is not open to minority shareholders and defends their secretive way of operating the business in court. In other words, VULC is the epitome of a ‘dark company’.
However, there are clear signs that at the current share price the business is still undervalued as the 2016 financials has recently surfaced and allowed the broader public to see what the company owns.
- While the company is operating a small rubber & foam manufacturing facility, the core value is in its stock portfolio which has materially appreciated since the financial crisis. It provides both a material dividend stream and a clear upside potential for investors. In 2016 the portfolio provided the company with $3 million in dividends and is now likely valued at around $161 million as per updated Nate Tobik’s assessment. This compares well with the current market capitalization of roughly $106 million.
- The portfolio is not the only valuable asset. Their real estate holdings are overdepreciated. Despite the fact that the manufacturing facility is losing money, the underlying real estate is likely to be valuable and could be worth at least $4 million as per property tax assessment. They also own large timber holdings in around Michigan which could add up to $14 million. Lastly, they develop real estate from time to time which is troublesome to track without the update financials but could add at least $7 million (based on property tax assessment) to the valuation.
