Update on ThinkSmart

Since I first posted on ThinkSmart (TSM) on 6 March the share price has fallen from $0.40 to a low of $0.32 today. To recap, the company announced in December last year that it sold its Australian leasing business to FlexiGroup for $43m. Post the completion of the sale, TSM will be left with its UK leasing business and a strong balance sheet with net assets of approximately $63m, no debt and around $48m in cash. They have since used $5.8m (3.6cps) of this cash by way of a special dividend to shareholders.

Together with a share buy-back, management were also intent on returning 7.4cps in cash (approximately $12.2m) by way of a capital return to shareholders. Today however, the company announced that after receiving feedback from shareholders, it will not immediately proceed with a capital return. Instead, the company will "consider its strategic options in respect of the return of capital, including the optimal manner by which to return capital to shareholders". 

The sell off has been fairly severe, falling as much as 15% this morning and I've taken the opportunity to increase my holding. I see no reason at this stage why the announcement should be considered concerning. There are a couple of institutions that are substantial shareholders, one which has been vocal (and quite successful) on several occasions in the past when it comes to maximising shareholder value. Management incentives also appear to be aligned. Executive Chairman, Ned Montarello, owns around 30m shares and other management own smaller amounts. Its a bit too early to tell, however the market seems to be more concerned with receiving cash now, rather than maximising value in the long run. We will need to wait though for a more detailed explanation from management.

A few figures based on the low price of today:




The market is pricing the value of the UK leasing business at around $10m. As per my previous post, I have estimated the business to be worth somewhere around 23-28 cps or between $37m - $45m. This is simply based off 2014 earnings guidance from management.




Note: The information contained in this post is for my own purposes only.  The post should not be confused with an investment recommendation and details should not be relied upon.