PGNX to Liquidate - $0.17 Distribution by End of Year

Earlier this month I wrote up PGNX when the company's stock was trading at $0.16, with the thesis that the release of escrow funds at the end of November would free up their cash and allow them to purchase a business again. The escrow was released as I predicted, but the company has decided to liquidate. Shareholders will receive a distribution of $0.17 in December, and the company will be shut down and the remainder of the assets distributed in a liquidating distribution. Remaining cash on their balance sheet is around $0.045 per share, and the company has indicated a liquidating distribution of $0.02 to $0.04 may be paid, although they also note liquidating expenses could eat up the remainder of the cash. This changes the investment to a purely mechanical liquidation scenario.
I'm holding my shares and will take the distribution and will likely wait for the liquidation to complete, as the IRR of waiting is very high even at the low end of the distribution range. Liquidations usually take longer than people expect and cost more, so there is still some risk. However, anyone who bought at $0.16 when I posted and receives a $0.17 distribution a month later shouldn't have too much to complain about.

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

Holdings and Picks from Great Value Managers

I'm going to occassionally do write ups on the holdings of managers I respect. Generally you can expect them to be value managers with excellent results. In the future these will be posted in the tab at the top of the page, but I'm putting it in the body of the blog at first for those using readers/feeds.


Arlington Value

Manager Allan Mecham has been beating the S&P 500 for years, and is still in his 30s. He has outperformed by 10% per year, and was up in 2008 during the crisis. He runs the fund with significant concentration.

Arlington Value Q3 2013 changes

Arlington Value's Biggest Holdings Q2 2013


Oceanstone Fund

The Oceanstone fund has been outperforming the S&P by ~30% per annum, and has done it with a concentrated portfolio of deep value picks, and often with a large cash weighting for downside protection.

Oceanstone 2013 Biggest Holdings

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

Eyelogic Systems (CVE:EYE.A) $0.08

The company is a cash box. Its been trading below net cash, and continues to do so. It is functionally controlled by the Olympia Trust/Tarjan Capital folks. The core Eyelogic business has been approximately cash flow even for a number of years, and their new business producing custom stretched canvases seems to be ramping up nicely. The company's primary business is the sale of optical equipment for performing eye exams. This business has not produced a reasonable return on capital for a number of years, hence the low current price of the company's stock. I believe management intends to sell or wind it up, and continue with their new business of custom stretched canvas production and sale. The company would be better off liquidating, but I believe that to be unlikely. The management team uses the company as a publicly traded vehicle for raising private capital. This does not cost Eyelogic anything, and the company generates some small fee income. However, this is likely to prevent a liquidation in the near term.

All that being said, the company seems to be able to operate at approximately cash break even, and it trades at $0.08 for a market capitalization of $241,000. With current assets of $946,740 and total liabilities of $183,591 the company has a net current asset value of $763,149, or more than three times its market cap. In addition, the company also owns Eyelogic systems which it leases to customers, and those customers have been buying out their contracts in recent quarters, which converts non-current equipment assets to cash.


Disclosure: Long EYE.A

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