PGNX Capital is a company that was formerly engaged in pharmacy operations in Western Canada. In 2012, it sold these operations to Shoppers Drug Mart, and paid a dividend of $0.45 per share to its shareholders. At that time, it changed its name from Paragon to PGNX Capital, as the Paragon name was one of the assets purchased by Shoppers. A portion of the purchase price was held back for adjustments, and is to be released in November 2013. Thus, the company's next financial report should show all of its cash as unrestricted. With just under $28 million in current assets (the vast majority being cash and restricted cash) and just under $8 million in total liabilities, the company has a net current asset value of approximately $20 million. (I know, I know, but if I don't do the math this post will only be two sentences).
Anyway, with a market capitalization of approximately $14 million, the company trades at 70% of NCAV. This discount is sufficient for me to invest, for a couple of reasons. The first is that I expect the company to acquire an operating business shortly after their cash becomes unrestricted. This company bought the Paragon assets as a blank cheque company, and I expect they will follow the same procedure. Also, with the IPO markets for junior sized company's in Canada in poor condition, a shell with $20 million in cash will be extremely attractive for those looking to raise public capital for their currently private business.
I've posted a couple of net-net's here today, but I'm always on the lookout for more. If you know of anything interesting, please go ahead and mention it in the comments!
Disclosure: Long PGN.H
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Trying to follow the sequence of events here:
ReplyDeleteSo PGNX Capital sold its pharmacy operations to Shoppers Drug Mart, then
It paid some of its sale proceeds ($0.45/share) as dividend to its shareholders, then
It changed the name from Paragon to PGNX Capital
At the time of the post, it had NCAV of $20M, but they will use the proceeds to buy another operating business? How do we know they will pay a good price for the biz (or will receive good value for the price paid)?
Regarding your last point about shell - this would be attractive to private businesses because they can get publicly listed?
Thanks!
Hello,
DeleteMy supposition was they would buy a business, but they actually decided to liquidate. See my update post here: http://safetyinvalue.blogspot.ca/2013/11/pgnx-to-liquidate-017-distribution-by.html
Basically, shortly after this they announced a $0.17 distribution, and are liquidating. They estimated another $0.02-$0.04 per share will be distributed at some point in the future, but I'm out of the name now