Lord Ashcroft is usually written about in the politics section of Britain's newspapers. Yet the business pages should probably pay him more attention the serial entrepreneur-turned-Tory-treasurer is involved with not just one but about half a dozen Aim-listed companies.
One where he recently invested a tidy sum is BB Holdings (AIM:BBHL). The company was listed via the back door when Michael Ashcroft restructured one of his other holding companies in 2005. The lack of a formal IPO is probably one reason why few investors have heard of it. Another reason for the market's lack of interest is the fact that Lord Ashcroft already owns 72.8% of the shares. On most days, not a single share changes hands. Yet, when a large block becomes available, Lord Ashcroft has often proved willing to buy them himself. In July 2008, he bought 620,164 shares for £1.3m (220p a share). At the same time his chief financial officer picked up 350,000 BB Holdings shares, worth £770,000. With such heavy insider buying, the company seems worth taking a closer look at.
BB Holdings nowadays owns just two investments. The biggest is a 100% stake in Belize Bank, which Lord Ashcroft bought for just $1 in the 1980s. Belize Bank (and the tiny Caribbean country Belize itself) was in a dire economic state at the time. Today, Belize Bank is a flourishing and highly profitable retail and commercial bank. It controls a leading market position in Belize (now a popular tourist destination near Mexico) and a massively growing business in the Turks & Caicos Islands (on the eastern edge of the Caribbean).
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The other investment is a minority stake in Numar, a palm oil producer based in Costa Rica but with operations in several Central American countries. As with other soft commodities, demand for palm oil has recently been very strong. Both investments may seem unusual, but Lord Ashcroft has a decade-long track record for finding opportunities in unexpected places. In 2007, BB Holdings grew its earnings by 34% to US$1.02 (57p) per share. During the first quarter of fiscal 2008-09, the growth showed no signs of abating, with 36% earnings growth and earnings of US$0.30 (17p) per share.
There are no analyst reports available; even the press hardly ever reports on the company. On the odd occasion when they do take notice, it's usually a politically motivated article castigating Lord Ashcroft for owning an offshore bank. With hardly any media interest in the share, what's supposed to drive this share price higher? Well, when insiders of a closely controlled company buy millions of pounds worth of shares, it's usually worth taking a closer look. And a closer analysis shows that BB Holdings has recently seen some noteworthy changes.
The company has hired a first-rate chief executive. Lyndon Guiseppi, who joined BB Holdings in August 2008, is one of the best bankers in the Caribbean. Several company statements point towards Belize Bank aiming to become a larger player in the Caribbean Basin a highly fragmented market with few strong local players and plenty of room for expansion. The bank has been hugely successful entering (and conquering) the market in the Turks & Caicos islands. Which island nation could be next?
The company has also just had its shares listed on the Bermuda stock exchange. Almost needless to say, a company that mixes palm oil production with banking hasn't got much chance of attracting any investor interest. Why then bother with the extra listing in Bermuda? Is this a sign BB Holdings wants to sharpen its appeal to outside investors and possibly embark on a PR campaign? Lord Ashcroft doesn't actually like holding minority stakes in other companies. Speculation is ripe that BB Holdings will use the booming soft commodities markets to sell the 24.8% stake in the palm oil business. The company would then be a pure play on the growing markets of the Caribbean Basin, which is certainly a story that could pique investors' interest.
BB Holdings isn't for investors who are looking for a quick day-trade. However, those who like to follow the trail of large-scale insider buys should take a close look. And with the company generating earnings in dollars, the sterling-denominated shares could be a way to profit from a weakening pound. The risk of course is that BB Holdings will remain overlooked and undiscovered. The same had been the case with shares of OneSource, another Aim-listed vehicle of Lord Ashcroft's, where the share price went sideways for years. Yet it did soar eventually, thanks to a public bid when Lord Ashcroft sold his controlling stake to a US investor the share price rose 678% in a single session. It's difficult to make a call on a billionaire entrepreneur's next move. But in the past, it more often than not has proved a good move to simply place a bet where he invested his own money. He isn't number 86 on the Sunday Times Rich List for nothing.
Sven Lorenz is author of the investment blog undervalued-shares.com and CEO of the Swiss fund management firm ARBB.
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