The AltX housing developer, RBA Holdings, last week announced its audited financial results for the year ended 31 December 2009.  The Group has been severly impacted by the recession, local private property bust and the bank's basically freezing home loan credit growth.

These factors all contributed to the Group's tangible NAV dropping just under 39% to 19.80c.  This acid test value for the troubled Group reflects against the current share price of 16c to show that the market is factoring in future losses (at least).

While current loss of 10.95c per share reflects badly versus this tangible NAV, the Group did manage to produce a gross profit of R25 million.  Albeit, this was on the back of a 56% drop in revenue for the Group.  This drop is simply reflective of the fact that only 266 homes were completed and sold during the period versus the previous financial period's 782 homes.  The Credit Crisis' shutdown of credit growth in banks is really the major culprit for this drop in demand.

On a positive note, the directors report that "...a big success of the 2009 financial year was the successful completion  and letting of 176 sectional title units in Protea Glen, Soweto. As at 31 December 2009 the first phase consisting of 100 units was fully tenanted."

Critically regarding the prospects of the Group the directors cite how "...recent  months have seen a continued relaxing by banks of their lending criteria. This along with an improvement in the affordability of mortgage loans due to lower interest rates and an improvement in clients` disposable income levels have resulted in a continued improvement in monthly sales. Although natural attrition in the workforce has taken place, the group has retained its sales, administration and production capacity through this difficult period and is well placed to take full advantage of the anticipated recovery in the affordable housing market."

Coupled with the surprise interest rate drop by Gill Marcus last week, perhaps RBA's prospects are finally looking a bit better.

Yesterday Blue Financial Services, the troubled pan-African micro lenders, released a further cautionary annnouncement backing up the original cautionary that was put out on 10 November 2010 and saying how negotiations are still continuing.

While there is nothing amazing in that, the directors did disclose some further information: "Shareholders are advised that the strategic options under consideration relate to either a potential recapitalisation of the company or, alternatively, a potential offer being made for the company."

It is likely that it is ABSA that is the other party in this potential deal.  ABSA was left with an unwanted 16.83% stake after the SSF fallout from cortex Securities.

ABSA would also have sufficient funds to recapitalise Blue and logical reason to also consider just buying the Group and extending its funds internally.

This scenario is going to end one of three ways:

1. Blue gets bought and its current shareholders get a nice little premium (perhaps an arbitrage opportunity),
2. Blue gets loans and struggles through (shareholders maybe one day see a profit and some capital appreciation), or
3. ABSA walks away, loses its stake, and Blue folds under lack of financing and mounting bad debts.

The most likely is probably the first ending to the scenario, but the other two could quite possibly also happen.  The fact that the share price actually dipped 3.7% by close of yesterday implies that the market disagrees with me about the first option (which would most probably be at a price higher than the current market price and, the market knowing this, would've bumped up the price)....