I was introduced to Imation (IMN) as a business selling below its net working capital value by Saj Karsan here and once again, here. The stock is still selling below Net Working Capital of $414M and the business has over $251M in cash and no debt.
This is a very Ben Graham style investment... and largely a balance sheet based investment opportunity. Imation has not been able to make a profit last couple years, and it is largely because of their expenses. That being said, Imation's free cash flow is excellent relative to the size of the business.
This has prompted me to calculate the intrinsic value of this business. Here are my results:
Lower bound: $11.31/shr (10yr avg FCF based NPV at 15% discount)
Upper bound: $15.28/shr (10yr avg FCF based NPV at 6% discount)
Book Value: $24.18/shr (as of Q2 2010)
I see the following possible scenarios.
The organization will figure out a way to deploy its $250M of cash, either as dividends, share buyback or an investment. The management seems sensible enough to know to get the best yield possible for that money. This should create a sufficient pop in the share price.
Imation could also be a takeover target and a decent premium could be expected.
Disclosure: I own Imation (IMN) at the time of this writing
PS: Thank you Saj for bringing forth this likely gem.
