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

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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 fo

historical articles) primarily because of the severe disparity between NAV (13.3p as at 30 Jun

2013) and the prevailing share price, currently 1.95p. Since then a number of developments hav

been announced, including the previously covered sale proposal for the Mediapolis asset. W

provide a brief summary of subsequent events below, and conclude with the exciting potential 2

special dividend, which could see new investors realize a 100%+ return if they purchase stock

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. Fortunatel

Clear Leisure had already flagged the discovery to the market back in October 201 3, which wipe

off around 1p from the share price (circa 2m off the market cap). Note also that this 2

valuation of ORH is consistent with managements view, according to the following statement: th

Company estimates that its total cash investment in ORH is approximately 2m (this doe

ignore the companys equity investment when acquiring its ORH position)(RN

12/02/14). Hence, the worst case scenario was already largely priced in, and so the news o

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 actuall

remains some upside which is dependent upon the outcome of the bankruptcy proceeding. Th

following excerpt describes the situation: the Company is actively seeking to extract [...] an

otential opportunities in the tourism sector, especially those related to the Italian hot

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 futur

rights in ORH, [...] with other tourism assets and activities. [...] The board already believes ther

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 sugge

that a surprise gain could arise from the bankruptcy proceeding which should benefit the shar

price.

Mediapolis Court Developments

The Board of Clear Leisure submitted a formal proposal for the restructuring of th

Mediapolis debt, which, if a favourable outcome is received, will then open the way for th

sale of the asset. This occurred on 10th January 2013.

On 23rd January 2013 management announced that an initial positive reply had bee

received regarding the restructure proposal and that an external professional assessor ha

been appointed in order to evaluate the quality and feasibility of the proposed plasubmitted by the Company (RNS 23/01 /14).

By 27th February 2013 the Tribunal Court decided that more information is required due t

the complexity of the restructuring plan, specifically in regard to the status of the buildin

permit and the financial coverage of the 12m debt position (RNS, 27/02/14. Th

additional information is to be submitted by 21st March and a final decision will be mad

upon the T ribunals re-adjourning.

Although the court procedure has dragged on for far longer than most investors envisage

progress does appear to be being made. However, the Company provides little detail on the twspecifics of the restructuring plan. This adds uncertainty to the situation until the final decision

announced.

Conditional 2p Special Dividend Announced

Management provided a strong signal of their bullish view on the court proceeding by announcin

ahead of the courts final conclusion that the Mediapolis sale proceeds would partly fund a 2

special dividend. Either management are getting a little ahead of themselves or there is goo

reason to believe a favourable outcome will eventually be announced.

Consider that management are putting themselves out on a limb by voluntarilyannouncing th

proceeds would be returned to shareholders. This is a very positive development indeed, and,

the result is not positive, will be a major disappointment for shareholders. Management therefor

appear to be very sure that the courts decision will be in their favour, otherwise they are settin

themselves up for a painful fall.

Of course, we should not take this weak signal as an indication that a positive outcome is a sur

thing. What we can consider is that in the worst case scenario, where the outcome is unfavourab


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and Mediapolis is liquidated, there are sufficient assets remaining on the companys balance she

which still significantly overshadow the current market cap of the Company. As it now appears

be the Boards intention to wind down the company and distribute cash to shareholders (if recen

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 opportunit

than when we initially tipped it. This is largely because it is now clear that asset disposals witranslate into special dividends, whereas before this was simply a speculation of ours. We re

iterate our BUY rating.

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