Monday, 18 November 2013

PGNX Capital Corporation (CVE:PGN.H) $0.16

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

Disclaimer: The content contained in this blog represents only the opinions of its author. I may hold long or short positions in securities mentioned in the blog, and no updates to the disclosure above will be made. I may buy or sell securities at any time. In no way should anything on this website be considered investment advice and should never be relied on in making an investment decision. Read that last line again. Also, this blog is not a solicitation of business. The content herein is intended solely for the entertainment of the reader and the author


  1. Trying to follow the sequence of events here:

    So 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?


    1. Hello,
      My supposition was they would buy a business, but they actually decided to liquidate. See my update post here:

      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