Point 360 Spin Off

Company overview

Point.360 is a full-service audio-visual asset management company. It has a 30 year track record of providing media services and offers services such as "telecine, HDTV services, encoding, duplication, distribution and asset tracking for commercials, promotional spots and long-form programming".

The Company is expanding its service reach to include "the management and enhancement of digital formats, utilizing technologies for storage, digital asset management, transmission, access, streaming and viewing"

Current Price:$5.50

Book value per share:$4.30
Price to Cash flow ratio:8.83

LT Debt % of Total Capital: 8%
4 yr average ROE:5.20%
4 yr average Net Margin:2.77

The business has poor fundamentals and may not be an ideal investment.The profit margins are razor thin and 4 yr average ROE is abysmal.Still, there is something interesting to look at its lastest SEC filing .Recently, it has agreed to merge with DG FastChannel Inc.(NDAQ:DGFC). Under " the terms of the agreement, DGFC will acquire Point.360's spot advertising distribution business, and Point.360 will spin off its remaining businesses to its shareholder". Senior management plans to remain on board the spin off, which is clearly a good sign that management is confident about the long term prospect of the company.The spin offf is expected to "generate revenues of about $45 million to $50 million with EBITDA around $4 million to $6 million during the next 12 months".Lastly,shareholders of Point 360 will receive a cash payment(not yet disclosed) from DGFC and shares in the spin off.

Clearly,this is an interesting play and warrants closer inspection as spin offs tend to perform well after coming out of their parent companies.