3/6/2014 2p Special Dividend Announced By Clear Leisure | PhynixManifesto

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2p Special Dividend Announced By Clear Leisure
We tipped this asset rich and cash poor company in the last quarter of 2013 (click here for
historical articles) primarily because of the severe disparity between NAV (13.3p as at 30 June
2013) and the prevailing share price, currently 1.95p. Since then a number of developments have
been announced, including the previously covered sale proposal for the Mediapolis asset. We
provide a brief summary of subsequent events below, and conclude with the exciting potential 2p
special dividend, which could see new investors realize a 100%+ return if they purchase stock at
current levels:
Liquidation of ORH Group
On 12th February management informed the market of its voluntary liquidation of the hotel arm,
ORH Group, after uncovering a major debt position previously unknown to CLP. Fortunately,
Clear Leisure had already flagged the discovery to the market back in October 2013, which wiped
off around 1p from the share price (circa 2m off the market cap). Note also that this 2m
valuation of ORH is consistent with managements view, according to the following statement: the
Company estimates that its total cash investment in ORH is approximately 2m (this does
ignore the companys equity investment when acquiring its ORH position)(RNS,
12/02/14). Hence, the worst case scenario was already largely priced in, and so the news of
liquidation had little lasting impact on the companys share price.
Now that ORH Groups unfortunate disposal is fully accounted for in the share price there actually
remains some upside which is dependent upon the outcome of the bankruptcy proceeding. The
following excerpt describes the situation: the Company is actively seeking to extract [...] any
potential opportunities in the tourism sector, especially those related to the Italian hotel
management market and web-based travel operations.
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Clear Leisure is also actively seeking to swap its potential tourism assets, or potential future
rights in ORH, [...] with other tourism assets and activities. [...] The board already believes there
could be a positive outcome in this regard. (RNS, 12/02/14)
Although this description tells of nothing definitive and is characteristically vague, it does suggest
that a surprise gain could arise from the bankruptcy proceeding which should benefit the share
price.
Mediapolis Court Developments
The Board of Clear Leisure submitted a formal proposal for the restructuring of the
Mediapolis debt, which, if a favourable outcome is received, will then open the way for the
sale of the asset. This occurred on 10th January 2013.
On 23rd January 2013 management announced that an initial positive reply had been
received regarding the restructure proposal and that an external professional assessor had
been appointed in order to evaluate the quality and feasibility of the proposed plan
submitted by the Company (RNS 23/01/14).
By 27th February 2013 the Tribunal Court decided that more information is required due to
the complexity of the restructuring plan, specifically in regard to the status of the building
permit and the financial coverage of the 12m debt position (RNS, 27/02/14. This
additional information is to be submitted by 21st March and a final decision will be made
upon the Tribunals re-adjourning.
Although the court procedure has dragged on for far longer than most investors envisaged,
progress does appear to be being made. However, the Company provides little detail on the two
specifics of the restructuring plan. This adds uncertainty to the situation until the final decision is
announced.
Conditional 2p Special Dividend Announced
Management provided a strong signal of their bullish view on the court proceeding by announcing
ahead of the courts final conclusion that the Mediapolis sale proceeds would partly fund a 2p
special dividend. Either management are getting a little ahead of themselves or there is good
reason to believe a favourable outcome will eventually be announced.
Consider that management are putting themselves out on a limb by voluntarily announcing that
proceeds would be returned to shareholders. This is a very positive development indeed, and, if
the result is not positive, will be a major disappointment for shareholders. Management therefore
appear to be very sure that the courts decision will be in their favour, otherwise they are setting
themselves up for a painful fall.
Of course, we should not take this weak signal as an indication that a positive outcome is a sure
thing. What we can consider is that in the worst case scenario, where the outcome is unfavourable
and Mediapolis is liquidated, there are sufficient assets remaining on the companys balance sheet
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and Mediapolis is liquidated, there are sufficient assets remaining on the companys balance sheet
which still significantly overshadow the current market cap of the Company. As it now appears to
be the Boards intention to wind down the company and distribute cash to shareholders (if recent
announcements are anything to go by) then the expectation of future cash distributions from
future asset disposals acts as a good margin of safety if the Mediapolis sale falls through.
From this perspective, we believe that Clear Leisure is a more attractive investment opportunity
than when we initially tipped it. This is largely because it is now clear that asset disposals will
translate into special dividends, whereas before this was simply a speculation of ours. We re-
iterate our BUY rating.

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