NCAV Play: Comdisco Holding Company (CDCO)

I spent almost a good portion of the day working on school work and have been wanting to write about this investment idea.

Comdisco Holding Company, Inc. (CDCO) emerged from Chapter 11 bankruptcy proceedings on August 12, 2002 and, under its Plan of Reorganization, its business purpose is limited to the orderly sale or run-off of all its remaining assets. In other words, Comdisco’s sole purpose is to reduce all of its assets to cash and to make distributions of all available cash to shareholders. Let me reiterate that that Comdisco is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose.

Thus far, Comdisco has paid out a cumulative $183.12 per share in dividends. The last dividend paid was December 13, 2006, which is more than two years ago.

So what’s Comdisco been doing as of late? From what I can tell, its been doing what it needs to be doing. In the past 5 quarters, Comdisco has increased cash on its balance sheet from 51.8 to 61.9 million, has been able to reduce its receiveables from 18.2 to 5.5 million, and has reduced total current liabilities from 13.8 to 9 million. However, total liabilities has remained steady at around 32-33 million.

So what’s the net current asset value of Comdisco? By my calculations (using the balance sheet data from Google), the NCAV is approximately $7.28 per share. Comdisco has a price of $7.1 right now, which means the stock is trading at about a 2.2% discount to NCAV. Not a particularly great deal.

However, if we estimate that Comdisco can reduce its receievables in half again (another 2.5 million or so) and if we throw in the long term assets that you would expect would be included in the final act of liquidation (another 5 million), then we get an adjusted NCAV of $9.14. Now you have a stock trading at a discount of 22.3% of its NCAV. That’s definitely a better deal considering what I think is an extremely low risk situation where all you have to do is sit and wait for the end.

Disclosure: I do not own any shares of CDCO.