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Autobytel Inc (NASDAQ:ABTL) is a net net stock with an investor declaring an active interest in late November. At yesterday’s close of $0.43, ABTL has a market capitalization of $19.4M and is trading at 55% of our estimate of its liquidation value of $35.3M. On November 21, 2008, Trilogy, Inc. filed its Schedule 13D notice, declaring an interest of 5.01%.

About ABTL

ABTL is a automotive media and marketing services company focused on helping dealers sell cars and services, and manufacturers build brands through marketing and advertising primarily through the Internet. The company owns and operates automotive websites MyRide.com, Autobytel.com, Autoweb.com, Car.com, CarSmart.com, AutoSite.com and CarTV.com. It connects automotive marketers with vehicle shoppers visiting these websites and third-party websites (primarily search engines, automotive information providers and other auto related venues). You can see the corporate website here.

The value proposition

ABTL’s most recent 10Q, specifically its earnings and cash flow, was abominable. The company lost $5.36M last year but surpassed that in the September quarter alone, losing$5.63M. ABTL had negative cash from operating activities last year of $6.91M and $2.88M in the quarter to September. As always we can find some value on the balance sheet, as our summary analysis demonstrates (the “Carrying” column shows the assets as they are carried in the financial statements, and the “Liquidating” column shows our estimate of the value of the assets in a liquidation):

With $32.2M or $0.71 per share in cash and equivalents on the balance sheet and total liabilities of $12.7M or $0.28 per share, ABTL is trading at its net cash value of $0.43. If we add in receivables of $12.7M (which we’ve written down by 20% to $10.2M or $0.22 per share), property, plant and equipment of $9.2M (written down to $4.6M or $0.10 per share) and a nominal $0.9M or $0.02 per share for the prepaid expenses, ABTL has a a liquidating value of $35.3M or $0.78 per share. ABTL’s liquidating value of $0.78 is 82% higher than its stock price of $0.43, which is a substantial margin for error (or safety).

The catalyst

Trilogy, Inc. filed its Schedule 13D notice, declaring an interest of 5.01% on November 21, 2008. The filing contains the standard boilerplate that says a great deal without actually disclosing Trilogy’s true purpose for the purchase.  Trilogy is a private operating company in the technology consulting industry, not a fund manager, so there is little public information available about its strategy. It seems odd for a technology consulting business to buy a substantial active stake in a listed company. It’s possible that the filing is a precursor to a bid for ABTL. An affiliate of Trilogy, Trilogy Automotive Advertising Services, operates a business focussed on the automotive industry. ABTL might fit nicely into that business. We’re only speculating, but on the basis that it might turn into a bid, ABTL is worth watching.

Conclusion

At its close yesterday of $0.43 ABTL is trading at its net cash and at a 45% discount to its value in liquidation. In short, it’s a bargain. With Trilogy disclosing an active interest that could be a precursor to a takeover bid, ABTL is worth a look.

ABTL closed yesterday at $0.43.

The S&P 500 Index closed at 899.24.

[Disclosure: We do not have a holding in ABTL. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.]