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Tern – disposal racks up mega profit with lightning speed

By Nigel Somerville, the Deputy Sheriff of AIM | Thursday 3 November 2016

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

You have to hand it to AIM-listed jam-tomorrow investment company Tern plc (TERN), this morning’s disposal news is a cracking outcome. Having bought a few bits of the now defunct Flexiant business out of administration over the summer for £75,000 we are told today that one of the divisions has been sold for $500,000. That is on top of a previously reported (in excess of) £90,000 of unpaid bills which were chased up. The only puzzle is why shares in Tern have slipped on the news, albeit only by a small amount at time of writing. Why the disappointment?!

Tern originally invested £100,000 into Flexiant as its first deal shortly after the restructuring which brought Angus Forrest and Bruce Leith to the helm of the shell rescued from the carcass of previously disastrous Silvermere Energy. A subsequent £34,635 appears to have gone in, and the whole lot then revalued to £269,270 as at 2015 year-end.

But all was not well within Flexiant, and the company was despatched to the corporate undertakers earlier this year, with Tern taking a full write-down. The accounts should probably say £269,270 down the swannee, although in cash terms it was just £134,635.

But Tern managed to acquire a few bits from the administrators for £75,000, chased up bills of over £90,000 and has now sold one division for $500,000 (with all but $75,000 in cash up front).

Let’s call that $500,000 about £410,000. On that basis, Tern has ended up making an overall gain of a very healthy £290,000 or so, and has a free business to boot. 

The calculation on the purchase out of administration alone is even more impressive: a free business and about £425,000 profit.

All that from an original investment which just a few weeks ago had to be written off altogether. Talk about a phoenix from the ashes.

I don’t like Tern as a company, but fair’s fair: this is a cracking outcome. It is full marks to Messrs Forrest and Leith – and to recently promoted to CEO Al Sisto.

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