Here is an article you may have already seen; it is on SLHO:
"Small KC company catching fire
Kansas City Business Journal, Tuesday, August 19, 1997 at 19:21
With little fanfare, a small Kansas City company with just seven
employees has been outperforming the raging bull market, its stock
price soaring more than 500 percent in a mere five months.
The company, SLH Corp., was spun off from Seafield Capital Corp. in
March. Since then, shareholders have seen the stock swell from the
equivalent of $6.25 a share (taking into account a 3-for-1 stock
split in July) to as much as $60.25 a share. On Tuesday of this
week, the stock had settled down to a more sustainable $40.25 -
still no slouch as stock plays go.
"It's the stock of the century," enthused broker Jack Moreland of
Perkins Smart & Boyd with just a touch of hyperbole.
So what is SLH and what accounts for the meteoric surge of its stock?
Basically, it's what was left of Seafield Capital after Seafield
sold Business Men's Assurance Co. of America in 1990 to an Italian
insurer and decided to hang onto its 82-percent interest in LabOne
Inc., a laboratory testing service that is now Seafield's sole
remaining subsidiary.
"With the different assets we had after the sale of BMA, it became
apparent to us that the best thing to do was to break out the
holding company," said 44-year-old SLH President and CEO Jim Seward,
who joined BMA in 1984 and later became chief financial officer of
Seafield Capital.
"We found the value of the pieces was worth more than the whole. The
market isn't interested in conglomerates anymore."
The pieces consist of miscellaneous real estate in Florida, Kansas,
Nevada, New Mexico, Texas and Wyoming; cash or cash equivalents - a
total of $30 million out of stockholders' equity of $48 million; and
BMA's one-time claims against architectural firm Skidmore Owings &
Merrill to recover the costs of replacing the facade of the BMA
Tower. (A $5.8 million judgment in January in favor of Seafield is
being appealed.)
Most significant of all, SLH has a 32 percent interest in Syntroleum
Corp., a Tulsa, Okla.-based company that has entered into licensing
agreements with ARCO, Texaco, Marathon Oil, Atlantic Richfield, and,
just two weeks ago, YPF International Ltd., a wholly owned
subsidiary of Argentina's largest oil company.
It is Syntroleum, and its extraordinary profit-making potential,
that are fueling the rise in SLH's stock. The company has developed
a patented process to cheaply convert natural gas into synthetic
crude oil, known as "syncrude" or "white crude," that contains no
sulfur or metals and can be refined into fuels. The technology was
lauded in a story in the May 19, 1997, issue of Business Week, which
referred to Syntroleum's prominent role in developing a more
affordable way to accomplish the conversion.
"What began as a trickle of interest after Syntroleum's breakthrough
last July is now a gusher," the article exclaimed.
SLH is more than a passive investor. Seward sits on Syntroleum's
board and SLH offers Syntroleum strategic advice and valuable
financial connections.
"They are as first-class as you can get," Syntroleum President and
Chief Operating Officer Mark Agee said. "Their ability to make
decisions and back you up, their ability to talk strategically,
their professionalism - you name it, they couldn't be better."
Besides its 32-percent stake in Syntroleum, SLH recently committed
$1.5 million in equity toward a Syntroleum "non-fuel" chemical plant
in Sweetwater County, Wyo., for the production of such "higher
value" products as synthetic lubricants, solvents and feed stocks
from natural gas. The plant's construction is contingent on
additional financing, and Seward, while decidedly upbeat about
Syntroleum's prospects, is also careful to note the risks.
"It's still a speculative situation because it hasn't been built
yet," he said.
In fact, SLH's stake in Syntroleum is carried on its books at zero,
reflecting start-up losses that SLH has amortized since Seafield
first invested in the company nearly nine years ago. But given the
promise of the technology and oil companies' apparent eagerness to
use it, it seems a sure bet SLH's books understate SLH's real value
significantly.
"Syntroleum is a start-up type of company and you expect those
losses," said SLH Chief Financial Officer Steven K. Fitzwater, who
added that SLH is "pleased with (Syntroleum's) progress."
Most of SLH's earnings at this point derive not from operations but
from asset sales and investments. For example, the company sold 10
residential units and lots in Florida in the first quarter for $1.8
million and 547 acres of land in Texas for $2.3 million. Likewise,
in the second quarter it sold its common stock in Watson
Pharmaceuticals Inc. for a gain of $1.4 million.
The company has virtually no debt, and with its mission focused on
Syntroleum, has no need for anything but a barebones payroll.
Operating out of a 2,500-square-foot office off of 95th Street and
Nall Avenue in Overland Park, SLH consists of just seven employees:
Seward; Fitzwater; SLH Chairman Tony Jacobs, who resides in Santa
Fe, N.M., and oversees SLH's real estate activities; Kimberly
Schaefer, who oversees the company's investor relations; Brian
Elvin, who oversees information systems; Linda McCoy, accounting;
and Julie Tushaus, accounting.
SLH's link to Seafield was severed on March 3, when Seafield
distributed to its shareholders all of its stock in SLH, which until
then had been a wholly owned subsidiary. As part of the
distribution, Seafield transferred to SLH its assets totaling $48
million .
The stock began trading on the OTC bulletin board at around $19. On
July 3, SLH's board approved a 3-for-1 stock split to broaden its
appeal to investors and to promote its application for listing on
the Nasdaq National Market. The application was approved on July 28
and the stock, trading under the symbol SLHO, has taken off.
On Aug. 8, following the YPF announcement, it hit a 52-week high of
$60.25, and has since floated closer to terra firma, hovering in the
low-$40 range.
So what's next for the high-flying company?
Seward said it will continue to convert non-cash assets into liquid
assets, enabling it to focus its attention on Syntroleum. And
Syntroleum, with 32 employees "and hiring as fast as we can,"
according to Agee, may go public itself someday, putting SLH in the
catbird seat.
"Syntroleum is where our value will really come from," Seward said.
SLH investors can only hope so. The roller coaster ride is probably
just beginning.
Companies or Securities discussed in this article:
Symbol
Name
NASDAQ:SLHO
Slh Corporation
NASDAQ:SFLD
Seafield Cap Corp
NASDAQ:LABS
Labone Inc
NYSE:ARC
Atlantic Richfield Co"
Hope it's useful. Good Luck!
JackH |
