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OffProfile (47.57)

W Holding Company (WHI) - Despite current issues, why is this stock so cheap?

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September 28, 2009 – Comments (8) | RELATED TICKERS: WHI

I have been following a specific stock for a couple of days now, because I just cannot figure out why it's valued the way it is.

According to the information I found so far W Holding Company is the holding company for the second biggest bank in Puerto Rico, namely Westernbank.

This stock evidently had some listing issues in the last few months due to having to restate results for several years, but they seem to have restated those numbers now (up to & including 2008) and have made arrangements with the SEC on when they have to finalise the 2009 numbers.

So that explains part of it, but still all the valuation numbers on all the financial sites say the same thing. Their shareholder equity at present is still about 950 million, but their market cap (with 33 million outstanding shares, if correct) at present is only 40 million, which would mean a P/B of less then 0,05! More then 95% discount.

Clearly their growth numbers are nothing to speak of at the moment and they may have some challenges ahead, but I just can't figure out this valuation. Even with all the issues it looks like the steal of a lifetime, as this bank is around since 1958 and isn't in imminent problems. If someone has more background info on this stock why this would or would not be a good long-term buy, that would be very helpful.

Thanks 

8 Comments – Post Your Own

#1) On September 28, 2009 at 12:55 PM, OffProfile (47.57) wrote:

Sorry for the typo.. the number of outstanding shares is 3,297,815 of course, not 33 million, otherwise the P/B couldn't be less then 0,05..

Current market cap as indicated 3,3 million times 12 = about 40 million, compared to shareholder equity of about 900-950 million.

Would have been a better deal for those SPNG (Spongetech) investors, I think..lol

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#2) On September 28, 2009 at 12:55 PM, OffProfile (47.57) wrote:

Sorry for the typo.. the number of outstanding shares is 3,297,815 of course, not 33 million, otherwise the P/B couldn't be less then 0,05..

Current market cap as indicated 3,3 million times 12 = about 40 million, compared to shareholder equity of about 900-950 million.

Would have been a better deal for those SPNG (Spongetech) investors, I think..lol

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#3) On September 28, 2009 at 3:39 PM, jaxomlong (< 20) wrote:


Actually, the 10Q filed in March, 2008 was December 31, 2007.  There was a runup in March, after the filing, but when 2008 was not forthcoming the price went back down. 

The FDIC filings looked ok last year.  I haven't dug into it this year, but they were "well capitalized," under the banking regulations, in December, according to a news release (maybe a footnote in the '07 10K).

The auditors changed in 2009 and the new auditors are probably putting them through the ringer, given their old problems. 

 

I have 20% of my stock holdings in this company (far more than I should).  I think they will work through it and skyrocket.

 

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#4) On September 28, 2009 at 6:45 PM, OffProfile (47.57) wrote:

Yeah, you're right on fillings.. they're late on the 2008, but OK, the auditor change would explain that then.. thanks for the feedback!

This almost seems a no-brainer, if fundamentally they are and remain sound.. do you know of any other explanation besides the fillings why their market cap is so ridiculously low?

Regardless, if these numbers i've seen keep adding up this stock should do pretty nicely, but again also today I can't figure out the big run-up lately.

It was doing pretty sweet this month before I finally bought 50 shs this morning (I know, I should have bought more but my middle name is 'diversification'.. lol) @ 12,20 & I just looked 5 minutes ago ( I live in Europe) & it closed @ 13,18! (+9%), so I don't know what's going on. 

If the number of outstanding shares is really correct @ only 4 million roughly this thing would still only have a market cap of 400 million @ share price of 100,00 for example, which would still be less then half of book..

I'll quess I'll just do what is easiest. See what my 50 shares do for the next few weeks or till whatever time the 2008 filling comes out. If that thing adds up OK and the numbers still show that their capitalization is still good (I saw somewehere their now @ 6% or something?) and they have shareholder equity of a few hunderd million then I'll commit more...

Then again, if they can buy back all the shares for roughly 40-50 million why don't they just do then.. then again these companies probably value being listed on the exchange instead of being privately owned.

Who said investing wasn't fun, if you like this sort of thing!

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#5) On September 28, 2009 at 11:37 PM, streetflame (99.82) wrote:

Current FDIC info: 

http://www2.fdic.gov/IDASP/StruReportNew.asp?inCert1=31027&ReportName=10&From=EzFind

Although they have incurred losses in the past year, their equity capital ratio has increased from 5.8% to 6.7%. For comparison, Banco Popular de Peurto Rico's equity capital has increased from 7.2% to 8.1% over the same time period, and they have had roughly similar losses.

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#6) On September 29, 2009 at 7:21 AM, jaxomlong (< 20) wrote:

Well, bluebird- your comment on Motley Fool is popping up on Google as a legitimate news story, reported by Motley Fool, which has a good reputation.  Your 50 share interest has created several million in shareholder value.

Seriously, people get concerned when they see legal problems and want tosee the auditors sign off that they are not serious.  I did did some research on Ixixs and the bank's relationsship and concluded that was all out there for those who look (I am a lawyer).  Also, I think that there is a small enough controling group that isn't trading that any action gets magnified.  

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#7) On September 29, 2009 at 7:47 AM, OffProfile (47.57) wrote:

Thanks for the feedback jaxomlong, how come our personal blogs are visible on Google? Also, I don't think my 50 shares have had a material impact although every buy helps of course.. lol. From what I've seen the price has been going up slowly already before I finally spend my 600 bucks yesterday!

Anyway, I know and understand now why their market cap is so low. Evidently their was a reverse split last year of 50 old share for 1 new share. It seems the price didn't meet a exchange requirement at that point, so what they did is bring convert 164.000.000 old common shares into roughly 3.300.000 new shares.

Normally that should mean they share price should increase about the same ratio as the reverse split, so if the price was 1 USD per share before the split, then you would have a new share price of $ 50 after the split. But for whatever reason the share went back down again, so I don't know if that had anything to the restatements of 2005, 2006, 2007 or with the financial results.

To conclude, the new common share amount and market cap reported seem correct after all, which is good of course. Less shares to share around the wealth. But of course you have to also consider pref shares in the total picture. When they complete the final fillings it should give a clearer picture on present book value compared to valuation by the market.

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#8) On September 29, 2009 at 12:27 PM, streetflame (99.82) wrote:

Note that 25% of shares are held short.  WHI could be heading into a huge short squeeze.  Or the short sellers could be right and another shoe may drop.

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