Thread by @puppyeh1

OK this is super illiquid (AIM-listed 💩) so of limited relevance perhaps. but it is - as they say in the business - 'compelling'

$CAMB.LN Cambria Automotive is a high-end car dealer. stock is 75p as i type. Entirely UK.

~45% owned by founder/CEO and his compadres...

..obvi the biz got hit by COVID but this is a strong mgmt team. they acquired two dealers during 2020 at land value only (paying nothign for the businesses). long history of strong execution here too.

CEO steps in a month ago w a potential bid at 80p to take $CAMB.LN private...

Interesting timing to say the least. You all know I love looking at UK COVID stat charts....

Here we see COVID is OVER in the UK. It's obvious the biz will bounce hard once people can actually go to showrooms...

UK businesses only reopened on Apr 12 (fully) so basically insiders are bidding on the basis of an un-reopened biz. Let's leave that for a second.

What are other guys saying about potential pent-up demand for cars?

Motorpoint $MOTR.LN had some bullish comments...from Apr 8:

What I'm getting at is the biz tailwind is likely extreme here - at least for a while if not years...this is important in case the bid disappears...

But what about the bid itself? What are insiders actually paying at 80p?

Short answer: ALMOST NOTHING😬😬

Here's the Aug accounts (shouldnt be too diff now). Book value of fixed assets is 87mm. Vast majority is freehold land (80mm+). This is largely prime(ish) RE, these are high-end dealers in good parts of town...

There is basically no funded debt. Yes there is a neg W/C position but this is sustainable in the course of businesses (their suppliers provide a bit of financing).

In other words w 100mm shares out at 80p they are basically paying book value for the land...that's it😠😠

Meanwhile 1) this book value is prob low; and 2) the biz itself did 14mm in pre-COVID EBIT and 12.5mm in pre-COVID PBT 👀👀

Of course they've cut costs and bought a cpl more dealers since then...and if demand is pent up why wouldn't EBIT go higher?

Keep in mind you can sell/monetize the RE somehow...to really juice your returns...which is clearly part of the game plan here...

Eg if you sold/leased-back all the land at say 6% (SWAG) you incur ~5mm in int exp so PBT falls to 7-8mm (pre improvement) - but you take out your entire purchase price as a div, instantly! LBO 101 behavior right there...

So CEO and co clearly think, why make 50mm from the recovery when we can make 200mm...then cash out and sell to Vertu etc in 3 years...

There's one snag. You need 75% to pass a scheme. @Symmetry_Invest owns some and has been vocal in saying 80p is insulting...obvi I agree...

So there's a few outcomes here:

1) no deal, CEO and co don't come to the table. Possible. Stock was at 67p pre-deal and mkt is better now so maybe theres some downside but not a lot...and the biz likely hoovers cash near-term...

2) Deal gets done - somehow - at 80p. You get a ~7% gross return in ~4months...pretty respectable return...

OR

3) Insiders bump bid to something that would actually get a deal done - 100p? higher no? - other a third-party like Vertu $VTU.LN comes to the party...

TL'DR: multiple ways to win, a cheap, well-positioned reopening play, w an event spin/catalyst. Just what we love here on Fintwit 🤣♥️

Yes I know its stupid illiquid so don't at me...

Disclosure: long small. DYODD, GLTA 🙏🙏