Steel
Partners Holdings LP (NYSE: SPLP)
Steel Partners Holdings L.P. ("SPLP"
or the "Company") is a global diversified holding company that
engages in multiple businesses, including diversified industrial products,
energy, defense, supply chain management and logistics, banking, food products
and services, sports, training, education, and the entertainment and lifestyle
industries. Table below indicates the value of each businesses (Except WebBank)
based on the publicly traded companies without taking NOL assets into account.
The company(SPLP) trades in the market for $527M, while the net assets of the company is approximately
$757M. We have an opportunity to purchase the net assets at 70 cents on the
dollar. The table below indicates the ownership and their worth in the public market today.
Majority of the holdings are undervalued in the market which is another layer
of margin of safety.
Holdings
|
Ownership Percentage
|
Worth ($M)
|
Handy & Harman Ltd
|
66.20%
|
298.562
|
GenCorp Inc
|
7.5%
|
106.575
|
DGT Holdings Corp
|
82.70%
|
39.696
|
CoSine Communications, Inc
|
48.30%
|
12.558
|
API Group PLC
|
32.30%
|
16.473
|
JPS Industries, Inc
|
38.70%
|
35.991
|
ModusLink Global Solutions Inc
|
27.70%
|
56.785
|
Nathan’s Famous, Inc
|
9.9%
|
32.67
|
SL Industries, Inc
|
24.10%
|
40.97
|
Steel Excel Inc
|
57.90%
|
145.329
|
WebBank
|
100%
|
110
|
Aderans Co. Ltd
|
27.70%
|
106.091
|
Mudanjiang Heng Feng Paper Co., Ltd
|
12.37%
|
51.8303
|
1053.5303
|
||
Debt
|
296
|
|
Net worth
|
757.53
|
Holdings information:
API Group PLC (API.LN):
API Group PLC (“API”) is a leading manufacturer
of specialized materials for packaging, headquartered in the United Kingdom.
SPLP owned approximately 32.3% of API, with a market value of $30.8 million.
For the trailing twelve months, API had revenue of about £110 million. The
balance sheet is strong, with net debt of only £5 million pounds and an
underfunded pension plan of about £13 million. The company began to pay a
dividend in late 2013.
CoSine Communications, Inc. (OTC: COSN.PK):
CoSine Communications, Inc is seeking to invest
its cash in one or more operating businesses with the potential for generating
taxable income and/or capital gains. This strategy may enable CoSine to realize
future cash benefits from its NOLs. SPLP ownership interest of approximately
48.3% in CoSine. It has approximately $357.1 million of NOLs.
DGT Holdings Corp. (OTC: DGTC.OB):
DGT Holdings Corp. (“DGT”), formerly Del Global
Technologies Corp., is now a company with cash, marketable securities and real
estate. SPH owns approximately 82.7% of the company
GenCorp Inc. (NYSE: GY):
GenCorp Inc. is a manufacturer of aerospace and
defense systems, and also has a real estate business. SPLP owns approximately
7.5% of GenCorp
Handy & Harman Ltd. (NASDAQ: HNH):
Handy & Harman Ltd. (“HNH”) is a diversified
manufacturer of engineered niche industrial products with leading market positions
in many of the markets it serves. Through its operating subsidiaries, HNH
focuses on high margin products and innovative technology and serves customers
across a wide range of end markets. HNH manages its group of businesses on a
decentralized basis, with operations principally in North America. SPH owned
approximately 66.2% of HNH, has NOLs of approximately $107 million.
JPS Industries, Inc. (OTC: JPST.PK):
JPS Industries, Inc. (“JPS”) is a major U.S.
manufacturer of extruded urethanes, polypropylenes and mechanically formed
glass substrates for specialty industrial applications. SPLP owns approximately
39.3% of JPS, with a market value of $27.3 million. JPS has NOLs of
approximately $55.5 million.
ModusLink Global Solutions Inc. (NASDAQ: MLNK):
ModusLink Global Solutions Inc. (“MLNK”) is a
comprehensive supply chain and logistics services company. MLNK is a trusted
and integrated provider to the world’s leading companies in consumer
electronics, communications, computing, medical devices, software, luxury goods
and retail. Their operating infrastructure is supported by more than 25 sites
across North America, Europe and the Asia/Pacific region. SPLP had an ownership
interest of approximately 27.1% in MLNK, with a market value of approximately
$59.1 million. MLNK has a market capitalization of $218.5 million and has
federal NOLs of approximately $2.0 billion as of July 31, 2013
Nathan’s Famous, Inc. (NASDAQ: NATH):
Nathan’s Famous, Inc. (“Nathan’s”) products,
which include beef hot dogs, fries and other products, are currently
distributed throughout the world. Additionally, Nathan's restaurant system
currently consists of 313 units, comprised of 308 franchised units and five
company-owned units. Nathan’s continues to grow its store count and cash flow,
and continues to be debt free with substantial cash reserves. SPLP owns 9.9% of
Nathan’s, with a market value of approximately $24.5 million.
SL Industries, Inc. (AMEX: SLI):
SL Industries, Inc. (“SLI”) designs,
manufactures and markets power electronics, motion control, power protection,
power quality and specialized communication equipment that is used in a variety
of industries. SPLP had an ownership interest of approximately 24.1% in SLI,
which has a market value of $24.4 million.
Steel Excel Inc. (OTC: SXCL.PK):
Steel Excel Inc. (“SXCL”) has two operating
subsidiaries; Steel Energy Ltd. (“Steel Energy”) and Steel Sports Inc. (“Steel
Sports”). SPLP owns approximately 57.9% of SXCL, with a market value of $211.6
million and had NOLs of approximately $146 million. The company has been
repurchasing shares every year as the shares continued to be undervalued.
WebBank (100% Ownership);
SPLP owns 100% of WebBank, an FDIC insured,
Utah-chartered industrial bank located in Salt Lake City. The bank is engaged
in a full range of banking activities, including making loans, issuing credit
cards and taking federally insured deposits. It is also a leading provider of
national revolving and closed end consumer and small business financing
programs. Revenue is largely derived from strategic partnerships that provide
fee income and interest income on loans held. The bank had pretax income of
$13.1 million in 2012. The bank reported net income of $11.3 million for 2013
and a return on average equity of 34.8%. The bank made a $7.5 million dividend
payment to its parent in 2013, and paid an additional dividend of $2.5 million
in January of 2014. The bank’s December 31, 2013 total assets and equity
capital were $171.0 million and $32.1 million, respectively. It could be worth
10 times after tax earnings conservatively, that is $110M.
SPH Services, Inc. (SPLP’s corporate services
subsidiary)
SPH Services, Inc. (“SPH Services”) owns
100% of SP Corporate Services LLC (“SP Corporate”), a subsidiary that was
created to consolidate the executive and corporate functions of SPH and certain
affiliates, as well as provide services, including legal, tax, accounting, treasury,
consulting, auditing, administration, compliance, environmental, health and
safety, human resources, marketing, public and investor relations and other
similar services, to other affiliate companies. Through the consolidation of
corporate overhead and back office functions, we continue to realize cost
savings for our affiliated companies, while at the same time, we are able to
deliver more efficient and effective services. SPH Services operates through
its wholly owned subsidiaries, SP Corporate and Steel Partners LLC. SP
Corporate currently has management services agreements with certain affiliates
including SXCL, SPH, DGT, WebBank, CoSine, SLI, iGo and Steel Partners, Ltd.
Steel Partners Japan Strategic Fund L.P. Steel
Partners Japan Strategic Fund (“SPJ”) owns 27.7% of the outstanding shares of
Aderans, and is Aderans’ largest shareholder. Josh Schechter and Katsuyoshi
Tanaka serve on the board of directors of Aderans and oversee initiatives that
are aimed at improving corporate and shareholder value. The value of Aderans co
ownership today is $105M
Aderans Co. Ltd. (8170: Tokyo):
Aderans Co., Ltd. (“Aderans”) is a leading
manufacturer, distributor and retailer of wigs, hair systems and extensions
throughout the world. SPJ owns 27.7% of the outstanding shares of Aderans and
is the company’s largest shareholder. SPJ has been invested in Aderans since
2004. Aderans has a strong portfolio of hair loss related brands including
Aderans and Fontaine in Japan, and Hair Club and Bosley in the US. Aderans also
holds the license for Revlon wigs. In April 2013, Aderans acquired Hair Club
for $163.5 million. Hair Club is the only provider of “all proven solutions”
for hair loss in the US. Hair Club and Bosley are the two premier brands for
surgical and nonsurgical hair restoration in the US. They have been working
diligently to integrate Bosley and Hair Club. They have already integrated a
number of corporate functions including marketing, call center, legal and HR.
Hair Club offices are now offering hair transplantation and Bosley is now
offering key non-surgical services such as hair therapy and Biomatrix hair
systems. Both companies are working together to address the expanding women’s
market. Sales and profitability have continued to improve at Aderans. For the
fiscal year ended February 28, 2014 sales were ¥67.8 billion and net income was
¥4.3 billion, up 32.6% and 29.7% over fiscal 2013, respectively.
Steel Partners China Access I L.P
Steel Partners China Access I L.P. currently
holds a 12.37% interest of Mudanjiang Heng Feng Paper Co., Ltd. (“MHFP”) stock
code 600356, down from 13.47%. During May and June 2013, Mudanjiang Hengfeng
Paper Industry Group Co. Ltd., a subsidiary of the Mudianjiang State-owned
Assets Investment Holdings Co., Ltd. converted a majority of its convertible
bond holdings of MHFP. This conversion caused a dilution of our interest from
13.47% to 12.37%. MHFP released 2013 results on April 29, revenues increased 4.7%
to 1,518 million RMB and net profit decreased 18.8% to 74.3 million RMB. The
decrease in net profit was mainly due to higher interest expense and finance
charges related to the convertible bonds. The paper industry is in a low growth
environment with high competitive pressures and demands for sustainable product
development. Cigarette paper specifically is under continued pressure, as
brands of the world tobacco market are highly concentrated and controlled by a
few large groups. Domestic demand may face some pressure, as regulations on
smoking in public places are contemplated and overall general health concerns
from tobacco smoking has increased. MHFP continues to be the largest domestic
cigarette paper supplier with a 32% market share. In response to these market
dynamics, MHFP is increasing its focus on cost controls, operating
efficiencies, new product development and a greater international sales effort
of its specialty paper products. Product development includes hand-rolled
paper, low ignition paper, Bible paper and coated paper products. SPLP’s 12.37%
interest of Mudanjiang Heng Feng Paper Co., Ltd is worth $52M in the market
today.
Management:
Warren G. Lichtenstein is Chairman and CEO of
Steel Partners LP. He has served as the Chairman of the Board and CEO of the
general partner of Steel Partners Holdings L.P. since 2009.
Conclusion:
The company (SPLP) trades in the market for
$527M, while the net assets of the company is approximately $757M. We have an
opportunity to purchase the net assets at 70 cents on the dollar with a good
margin of safety. Management has proven that they can create value over long term. When they do so in the coming years, the discount will narrow or we have an option to purchase this security at even more cheaper.
Disclosure:
I / partnerships that I manage own shares of
this company.
