You're right in saying that SEV is undervalued (and has been for...

You're right in saying that SEV is undervalued (and has been for some time). Keep in mind that some of SEV's cash (a bit under $500m) is equity raised by issuing their 'listed yield shares' (TELYS3) which trade under the ticker code SEVPC. Although the TELYS3 money is considered equity for accounting purposes, it is somewhat like debt in that SEV is liable to pay interest (dividends) on that money at a fixed margin above the official rate, and possibly may one day (as early as May 2010) repurchase the units for $100 a pop. Even despite this, though, SEV is looking pretty cheap especially when you consider their investments in WAN, TLS, and other equities. As for their investment in Seven Media Group (owner of the TV network and magazine business), this is considered impaired because it's loaded up with debt though is likely to eventually become profitable again. Note that Seven Media has no recourse against SEV for any of its debts.

I think SEV's strong cash position makes its TELYS3 look like a reasonably safe bet both for income and a potential capital return. (I was lucky enough to buy some recently around the $80 mark and would be happy with either a stepped-up rate from May 2010 or a cash return.)

As for your second question (though I'm no expert on buybacks): buybacks are generally a good idea when the shares are trading at below net assets. This means that the company can spend $x worth of assets for less than $x cash. The company then cancels the shares it buys back and the net result is an increase in net assets per share (and hopefully an increase in the share price).

For example, imagine a small company with 100 shares outstanding with NTA of $1 per share (i.e. net assets = $100) and a share price of $0.80. If the company buys back and subsequently cancels 50 of its shares, it spends $40 in the process. The result is net assets of $60 and 50 shares outstanding, which equates to $1.20 per share - i.e. a 20% increase in NTA per share.

Hope that helps.