Urbana Investment Presentation

• 1. Long / Short Trade Idea
  Tuesday, August 3rd, 2010
  By: Kyle DSilva
  

2. INVESTMENT THESIS
35% discount to NAV (~50% upside)
Reversion to the mean trade
Stock at historically high discount to NAV
Comparables do not trade at such a high discount
Multiple short-term and long-term catalysts
Management buying / Share buy-back
Portfolio revaluation / IPO / Takeover bids
Can easily hedge ~70% of investment, unlike comparables
3. COMPANY INFORMATION
4. BUSINESS DESCRIPTION
Urbana Corporation invests across the exchange sector, from cash markets to derivatives and from private, mutually owned exchanges, to those which are publicly traded.
5. HISTORY
1947 Incorporated as Macho River Gold Mines
2002 Shares listed on TSX Venture
2003 to 2004 Acquired 3 NYSE seats, investment assets > mining assets
2005 Change of business from mineral exploration to investment fund
2007 - Graduated to TSX, raised capital, began making investments in stock exchanges
6. BASIC INFORMATION
STOCK INFORMATION
Stock Price (URB.A) - $1.24
Shares Outstanding 85.6mm shares
10mm common shares
75.6mm Class A Non-Voting
Public Market Cap - $106.7mm
127,000 share 3 month average daily volume
SHAREHOLDER BASE INFORMATION
URB 66% owned by the Caldwell family (Thomas, Brendan, and Theodore)
URB.A - 18% owned by Horizon Asset Management
7. STOCK PRICE CHART
8. CAPITAL STRUCTURE
9. CAPITAL STRUCTURE
10. CORPORATE PERFORMANCE
11. PORTFOLIO COST & VALUE ($mm)
12. PORTFOLIO PROFIT ($mm)
13. VALUATION
14. PRICE / NAV
15. PORTFOLIO ANALYSIS
NAV = $1.94, implies 35% discount to NAV at current market prices
16. COMPARABLE INVESTMENTS
17. VALUE CREATION & CATALYSTS
18. ORIGINAL VALUE CREATION STRATEGY
19. NEW VALUE CREATION STRATEGIES
20. INSIDER BUYING
21. SHARE BUYBACKS
22. SHARE BUYBACKS (mm)
0.6x - 0.8x P/NAV
0.7x - 0.8x P/NAV
0.75x P/NAV
0.65x P/NAV
0.6x P/NAV
23. NEW VALUE CREATION STRATEGIES
24. MANAGEMENT DIALOGUE
25. MANAGEMENT DIALOGUE
26. CATALYSTS
SHORT TERM
Economic / market rebound Increase in portfolio value
Share repurchase plan (Insider buying)
BSE revaluation and speculation (George Soros)
LONG TERM
Removal of trade restrictions on CBOE (12/10, 06/11)
Takeover of CBOE
BSE goes public (Publicly stated for 2011)
Potential dissolution of Urbana
27. TRADING STRATEGY #1
28. Public v.s Private %
CBOE goes public June 15th, 2010
29. LONG URB.A / SHORT PORTFOLIO
Buy 48,000 URB.A shares
Short
985 NYSE (NYX) shares
1063 CBOE (CBOE) shares
101 TMX Group (X) shares
Sell ~$59,000 USD at 0.971 USD / CAD to ensure NYSE and CBOE shares are currency hedged
30. LONG URB.A / SHORT PORTFOLIO
Buy 48,000 URB.A for $59,520
The net stub value is $0.08 / share
The un-traded stub value is $0.61 / share
By putting on this trade, you capture $0.69 / share of value for free.
Short 985 shares of CBOE, 1063 shares of NYX, and 101 shares of X, which totals $1.32 / share of value sold.
31. TRADING STRATEGY #2
32. LONG URB.A
Buy shares of URB.A
45% annualized NAV standard deviation
100% annualized stock price standard deviation
Implies that there is more volatility in the stock, therefore a greater chance of the stock reaching a higher price and closing the NAV discount
33. CONTACT INFORMATIONKyle DSilva, [email protected]: 519-902-7961