Archive for the ‘PRXI’ category

Premier Exhibitions (PRXI) – Lots of Uncertainty; Not a Lot of Risk

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As I mentioned in this note, I don’t make a habit of writing about small cap companies with very little liquidity. This time I’m making an exception with a huge “flashing lights” warning – this stock trades $35,000 in dollar volume per day. Buying or selling more than $3,500 worth of this stock in a single day will likely move the market. So if you are inclined to take the risk, put the trade on in your PA, not your fund.

Below I present the investment case for Premier Exhibitions (PRXI) via excerpts from the April 22 shareholder call (read it in full here):

First, let me update you on the strategic alternatives process being pursued with JP Morgan. Our Board, along with JPM, continues to review strategic alternatives. As part of this process, our preliminary valuation work based on financial data provided to JP Morgan by Premier indicates that our shares are trading at a discount to the intrinsic value of the cash flows from operations.  While no valuation from an investment bank is precise, the range of values being indicated by JP Morgans’s preliminary valuation of Premier’s operating business exceed the Company’s current market capitalization before consideration for the value of the Titanic assets.

Buyside Notes: On an operating basis, PRXI shares are cheap. If you include the value of their exhibition assets, the shares are very, very cheap.

Premier owns a unique, one-of-a kind collection of artifacts and intellectual property related to the most iconic underwater wreck site in history. You are also aware that the auction process in 2012 did not yield a buyer for the collection. Without revisiting history, the process gave us great insight into the asset and the complexities involved in selling it. While the current market price for Premier’s stock indicates investors have established a diminished value for the Titanic assetswe remain confident that these assets hold tremendous value for shareholders.

Buyside Notes: A 2009 appraisal done by the courts found the fair market value of the Titanic artifacts to be $110,859,200 (see page 8 here). Management stated that the “value of the assets with the IP surrounding the collection is $189 million” but that the $189MM doesn’t include “intellectual property that was obtained in the dive in 2010, […] a database of information related to all the artifacts, all of the video, all the photography, all the passenger stories […].”

Let’s assume the low end is the right value. $110MM doesn’t include the “IP” nor does it include any appreciation since 2009, but let’s use it. Now compare $110MM to the current enterprise value of the Company, which is $42MM. The difference between the value the market is assigning and the intrinsic value is a gaping $68.7MM (note that in a sale, there will be tax implications so shareholders wouldn’t realize the entire $68.7MM but the point remains: based on the assets alone, this Company is seriously undervalued).