Nam Tai – All The Right Stuff (NYSE:NTP)

Via SeekingAlpha.com

Last week Iszo Capital made public this letter, Iszo Capital’s letter . We believe shareholders of NTP are very disappointed with the board of directors and management of NTP. We think that there are good odds that there will be enough votes to call a special meeting (takes 30% of shareholders in the affirmative) and there are good odds that there will be enough votes to replace the board of directors (takes 50% of shareholders in the affirmative).

Disclosures right off the bat:

We own material position in Namtai Property. We have owned shares off and on since 1998.

We have not spoken to, or communicated with any company insiders or company officials. Actually, if you can get a hold of the company’s investor relation team, you should get a gold star. We have called numerous times, no answer and no call backs. We don’t have any inside information. We are just looking at the available public information and comparing it to why activists generally fail.

NTP owns two large plots of land in Shenzhen, China. One is 23 acres (called Inno Park) and NTP has finished development of this 2.9 million sq. ft. of award-winning leasable space. Just this one property taken at $120 per square foot valuation equals $348 million. When I submitted this article the stock’s market cap was $213m. The property is leasing now. The other 13 acres (called Inno City) is likely more valuable because of the proximity to the airport and the city center and is now being developed. NTP has valuable building permits. Shenzhen is the electronics capital of the world and enjoys tax breaks.

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To learn more about the situation and the proposed solution, see Iszo Capital’s letter to investors, where you can sign up to have your voice heard. Iszo has stated that they want to replace the board, improve capital allocation, and improve operating income. Our takeaway is they want to monetize these assets. Also there is an outside investor’s website about the company, with the history and appraisals of NTP’s real estate. To get up to speed you should read the information on this these sites, we are not going to repeat the information already published there.

In this case we believe the 4 steps needed have been checked to effect change:

Step 1: Get your team on Board of Directors.

It is our belief that the two outside board members are not happy with the current management of NTP. We can only assume this because we have never spoken to, or communicated with these BOD members ever. One of the BOD members (Peter Kellogg) owns 20% of NTP. If you owned 20% of a company that had gone nowhere for about 30 years would you be happy?

Step 2: Know somebody that can be CEO.

In this case we believe a previous president and CEO of NTP could fill positions at the company. This is also our presumption. We have never spoken to, or communicated with the previous CEO of NTP. We don’t know why the previous president and CEO is not with the company as of the fall of 2019. We believe the previous CEO still has shares and would like to benefit.

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Step 3: Expect to have enough shareholder votes

Here most of the time institutions own a large percentage of the shares. You can’t get insights how an institution will vote beforehand. They usually have outside consultants vote their shares according to some type of protocol. As far as we can see, NTP is mostly owned by individuals and smaller hedge funds. We just assume that the only protocol the current shareholders have is; how could a new management team do worse? We think its common sense how the current shareholder base will vote.

Step 4: Have a big gap between price and value

If there is not a large gap why take the risk and waste the effort?

We refer you here to previous appraisals of the company’s real estate. Since these appraisals, the properties have had large improvements and have been granted many permits. Previous appraisals can be found here. These appraisals were based on when the 23 acres (Inno City) was just dirt and had no building permits. The 13 acres (Inno City) had old factories and also had no building permits. With the cash on the balance sheet, NTP was then valued at $22-$24. At that time Kaisa Real Estate group paid the founder of NTP $17 per share for his position. Kaisa went on to buy more shares of NTP and now hold about a 24% position.

NTP is domiciled in the British Virgin Islands. Their security laws dovetail Delaware’s security laws. Their laws clearly lay out the ability to call a special meeting by shareholders and that shareholder can put a slate of new directors to vote.

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Risk factors:

1. USA/China relations 2. Covid 19 and weak economies 3. Current management’s response 4. Something that we don’t know or can’t know

Place your bets!

Disclosure: I am/we are long NTP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is for information only. We make no recommendation or are we acting in an advisory position. Do your own due diligence. Investing involves risks.