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Archive for the ‘Digirad Corporation (NASDAQ:DRAD)’ Category

Digirad Corporation (NASDAQ:DRAD) has filed its 10Q for the quarter ended September 30, 2009.

We started following DRAD (see our post archive here) because it was an undervalued asset play with a plan to sell assets and buy back its stock. The stock is up more than 167% since we started following it to close yesterday at $2.35, giving the company a market capitalization of $36.1M. We last estimated the liquidation value to be around $32.5M or $1.73 per share. We’ve now increased our valuation to $32.9M or $1.77 per share following another very good quarter for DRAD. Year-to-date, DRAD has generated over $3.4M in cash from operations. DRAD has also started buying back stock under its previously announced $2M stock repurchase plan.

The value proposition updated

DRAD has continued its good year, generating $3.4M in operating cash flow year-to-date. Our updated estimate for the company’s liquidation value is set out below (the “Book Value” column shows the assets as they are carried in the financial statements, and the “Liquidating Value” column shows our estimate of the value of the assets in a liquidation):

DRAD Summary 2009 9 30Off-balance sheet arrangements and contractual obligations: The company hasn’t disclosed any off-balance sheet arrangements in its most recent 10Q.

The catalyst

DRAD’s board has announced a stock buyback program:

The Company also announced that its board of directors has authorized a stock buyback program to repurchase up to an aggregate of $2 million of its issued and outstanding common shares. Digirad had approximately 19 million shares outstanding as of December 31, 2008. At current valuations, this repurchase plan would authorize the buyback of approximately 2.1 million shares, or approximately 11 percent of the company’s outstanding shares.

Chairman of the Digirad Board of Directors R. King Nelson said, “The board believes the Company’s direction and goals towards generating positive cash flow and earnings coupled with an undervalued stock price present a unique investment opportunity. We are confident this will provide a solid return to our shareholders.”

According to the most recent 10Q, the company has now started to buy its own stock, albeit a relatively small amount:

On February 4, 2009, our Board of Directors approved a stock repurchase program whereby we may, from time to time, purchase up to $2.0 million worth of our common stock in the open market, in privately negotiated transactions or otherwise, at prices that we deem appropriate. The plan has no expiration date. Details of purchases made during the nine months ended September 30, 2009 are as follows (Edited to fit this space.):

DRAD Buy Back Detail 2009 09 30

Conclusion

DRAD is now trading at a reasonable 24% premium to its $32.9M or $1.77 per share in liquidation value. It’s off about 20% from its peak, and looks likely to continue to drop. We’re generally sellers of secondary securities trading at a premium to liquidation value, but DRAD seems to have the started generating cash. We’d like to see where it can go. We can see no other reason to cease holding DRAD in the Greenbackd Portfolio and so we’re going to maintain the position for now.

[Full Disclosure:  We do not have a holding in DRAD. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

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Digirad Corporation (NASDAQ:DRAD) has filed its 10Q for the quarter ended June 30, 2009.

We started following DRAD (see our post archive here) because it was an undervalued asset play with a plan to sell assets and buy back its stock. The stock is up more than 118% since we started following it to close yesterday at $1.92, giving the company a market capitalization of $36.1M. We last estimated the liquidation value to be around $29.5M or $1.56 per share. We’ve now increased our valuation to $32.5M or $1.73 per share following a very good quarter for DRAD, in which it generated over $2.2M in cash. DRAD has also now started to buy back stock under its previously announced $2M stock repurchase plan.

The value proposition updated

DRAD had a very good second quarter, generating $3M in operating cash flow and ending the quarter up more than $2.2M in cash. Our updated estimate for the company’s liquidation value is set out below (the “Book Value” column shows the assets as they are carried in the financial statements, and the “Liquidating Value” column shows our estimate of the value of the assets in a liquidation):

DRAD Summary 2009 6 30

Off-balance sheet arrangements and contractual obligations: The company hasn’t disclosed any off-balance sheet arrangements in its most recent 10Q. The contractual obligations as at December 31 were around $3.0M, around $1.4M of which falls due in the next 12 months to December 31, 2009.

The catalyst

DRAD’s board has announced a stock buyback program:

The Company also announced that its board of directors has authorized a stock buyback program to repurchase up to an aggregate of $2 million of its issued and outstanding common shares. Digirad had approximately 19 million shares outstanding as of December 31, 2008. At current valuations, this repurchase plan would authorize the buyback of approximately 2.1 million shares, or approximately 11 percent of the company’s outstanding shares.

Chairman of the Digirad Board of Directors R. King Nelson said, “The board believes the Company’s direction and goals towards generating positive cash flow and earnings coupled with an undervalued stock price present a unique investment opportunity. We are confident this will provide a solid return to our shareholders.”

According to the most recent 10Q, the company has now started to buy its own stock, albeit a relatively small amount:

On February 4, 2009, our board of directors authorized a stock buyback program to repurchase up to an aggregate of $2.0 million of our issued and outstanding common shares. The timing of stock repurchases and the number of shares of common stock to be repurchased are in compliance with Rule 10b-18 under the Securities Exchange Act of 1934. The timing and extent of the repurchase depends upon market conditions, applicable legal requirements, and other factors. During the three and six months ended June 30, 2009, we repurchased 198,000 and 209,000 shares, respectively, of our common stock at a cost totaling $0.3 million at a weighted average price of $1.28 per share.

Conclusion

At its $1.92 close yesterday, DRAD is trading at a small premium to its $32.5M or $1.73 per share in liquidation value. We’re generally sellers of secondary securities trading at a premium to liquidation value, but DRAD seems to have the potential to transition to a cash generator. We’d like to see where it can go. We can see no other reason to cease holding DRAD in the Greenbackd Portfolio and so we’re going to maintain the position for now.

[Full Disclosure:  We do not have a holding in DRAD. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

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Digirad Corporation (NASDAQ:DRAD) has filed its 10Q for the quarter ended March 31, 2009.

We’ve been following DRAD (see our post archive here) because it is an undervalued asset play with a plan to sell assets and buy back its stock. The stock is up more than 43% since we started following it to close yesterday at $1.26, giving the company a market capitalization of $23.9M. We initially estimated the liquidation value to be around $29.3M or $1.55 per share. After reviewing the Q1 10Q, we’ve left the valuation essentially unchanged at $29.5M or $1.56 per share. The company’s net cash value is around $15.6M or $0.82 per share. DRAD has announced a plan to repurchase $2M of its stock, but it has not yet repurchased a material amount of stock.

The value proposition updated

Our updated estimate for the company’s liquidation value is set out below (the “Book Value” column shows the assets as they are carried in the financial statements, and the “Liquidating Value” column shows our estimate of the value of the assets in a liquidation):

drad-summary-2009-3-31

Balance sheet adjustments

We make the following adjustments to the balance sheet estimates above:

  • Cash burn: The company used $0.6M in cash in the first quarter. We have not included any cash burn in our estimate as DRAD’s first quarter’s cash burn was primarily due to a seasonal increase in DRAD’s inventory and a reduction in its accrued compensation and other liabilities and we do not expect this to be repeated in the second quarter.
  • Off-balance sheet arrangements and contractual obligations: The company hasn’t disclosed any off-balance sheet arrangements in its most recent 10K. The contractual obligations as at December 31 were around $3.0M, around $1.4M of which falls due in the next 12 months..

The catalyst

DRAD’s board has announced a stock buyback program:

The Company also announced that its board of directors has authorized a stock buyback program to repurchase up to an aggregate of $2 million of its issued and outstanding common shares. Digirad had approximately 19 million shares outstanding as of December 31, 2008. At current valuations, this repurchase plan would authorize the buyback of approximately 2.1 million shares, or approximately 11 percent of the company’s outstanding shares.

Chairman of the Digirad Board of Directors R. King Nelson said, “The board believes the Company’s direction and goals towards generating positive cash flow and earnings coupled with an undervalued stock price present a unique investment opportunity. We are confident this will provide a solid return to our shareholders.”

According to the most recent 10Q, the company has not bought back a material amount of stock:

On February 4, 2009, our board of directors authorized a stock buyback program to repurchase up to an aggregate of $2.0 million of our issued and outstanding common shares. The timing of stock repurchases and the number of shares of common stock to be repurchased are in compliance with Rule 10b-18 under the Securities Exchange Act of 1934. The timing and extent of the repurchase depends upon market conditions, applicable legal and contractual requirements, and other factors. During the three months ended March 31, 2009, we repurchased 11,000 shares of our common stock at a cost totaling $11,000.

Conclusion

At its $1.26 close yesterday, DRAD is trading at around 81% of its $29.5M or $1.56 per share in liquidation value. We see no reasons to cease holding DRAD in the Greenbackd Portfolio and so we’re going to maintain the position.

[Full Disclosure:  We do not have a holding in DRAD. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

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Digirad Corporation (NASDAQ:DRAD) is a tiny undervalued asset play with a plan to sell assets and buy back its stock. At its $0.88 close on Friday, the company has a market capitalization of $16.7M. We estimate the liquidation value to be around 76% higher at $29.3M or $1.55 per share. The company’s net cash value is around $16M or $0.85 per share, which means the company is trading at a small premium to its net cash. DRAD plans to put the cash to good use, announcing a share buyback to repurchase $2M of its stock.

About DRAD

DRAD is a provider of cardiovascular imaging services and solid-state nuclear medicine imaging products to physician offices, hospitals and other medical services. The company operates through its wholly owned subsidiaries, Digirad Imaging Solutions, Inc. and Digirad Ultrascan Solutions, Inc. The company’s investor relations website is here.

The value proposition

DRAD’s earnings and cash flow are nothing to write home about. The company generated positive cash from operating activities for the last two years of $4.72M in 2007 and $2.37M in 2008, but capital expenditures have made the company a net consumer of cash. The summary of our estimate for the company’s liquidation value is set out below (the “Book Value” column shows the assets as they are carried in the financial statements, and the “Liquidating Value” column shows our estimate of the value of the assets in a liquidation):

drad-summaryWe estimate DRAD’s liquidation value at around $29.3M or $1.55 per share.

Off balance sheet arrangements and contractual obligations

The company hasn’t disclosed any off-balance sheet arrangements in its most recent 10K. The contractual obligations as at December 31 were around $3.0M, around $1.4M of which falls due in the next 12 months.

The catalyst

DRAD’s board has announced a stock buyback program:

The Company also announced that its board of directors has authorized a stock buyback program to repurchase up to an aggregate of $2 million of its issued and outstanding common shares. Digirad had approximately 19 million shares outstanding as of December 31, 2008. At current valuations, this repurchase plan would authorize the buyback of approximately 2.1 million shares, or approximately 11 percent of the company’s outstanding shares.

Chairman of the Digirad Board of Directors R. King Nelson said, “The board believes the Company’s direction and goals towards generating positive cash flow and earnings coupled with an undervalued stock price present a unique investment opportunity. We are confident this will provide a solid return to our shareholders.”

The impact of a $2M stock buyback at Friday’s closing price is to increase per share liquidation value by around 6% to $1.64 and leaves the company with $26.3M in cash and short term investments. We’d like to see a larger buyback (for example, $5M increases the per share value by around 20% and leaves $23.3M in cash), but this is a good start.

Conclusion

At its $0.88 close on Friday, DRAD is trading at around 57% of its $29.3M or $1.55 per share in liquidation value and at a small premium to its $16M or $0.85 per share in net cash. The share buyback to repurchase $2M of its stock will increase the per share liquidation value by around 6% to $1.64. We’re adding DRAD to the Greenbackd Portfolio.

DRAD closed Friday at $0.88.

The S&P500 Index closed Friday at 683.38.

Hat tip to JM.

[Full Disclosure:  We do not have a holding in DRAD. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

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