We are recommending a long position in Rella Holdig A/S with a price target of 78.61 Danish Krones vs. 5/17 share price of 47 Danish Krones for an expected appreciation of 67% (all financials and share prices referred to in this write-up will be in Danish Krones).  The Investment was previously written up by Chewy in 2012.  We note that the shares only trade ~$80k dollars/day so the idea may not be suitable for all funds. 

Rella Holding A/S is a holding company for the B shares of Aller Holding A/S.  Rella holdings represent a 60.5% economic interest in Aller A/S, the leading publisher of weeklies in Scandinavia.  Aller sells ~ 2.5M copies per week with a 60% share of the Scandinavian market.  Aller’s core markets are in secular decline as we expect online/digital media to continue to take share from traditional publishing.  Aller’s average weekly circulation has declined from 3.1M weeklies in 2008 to 2.5M in 2012 (consistently/steadily declining every year).  Despite the decline in weeklies, Aller has been able to grow revenue every year since 2009 (although revenue is down from its 2008 peak), through growth in its “Other activities” (e.g. client publishing, casual gaming, E-trade, etc…) and via small acquisitions.

Despite the negative industry trends we believe an investment in Rella has attractive risk/reward characteristics.  The company has net cash/marketable securities on the balance sheet of $60.83 or a 29% premium to the 5/20 closing price of  $47.  We value the company below based on both NAV and earnings power frameworks.