Rockshield Capital Corp is a net-net which is transitioning from a junior resource company to an investment company. RKS has $5.4 million in cash and $5.2 million in investments on their latest balance sheet, against which they have on $32,000 in liabilities. That equates to a cash value of 11.9 cents per share, which is nearly double the current share price, before accounting for any value to their investments.
The investments are in a variety of small and micro cap companies in Canada. For those interested, the investments are in:
Saber Capital Corp.
Helius Medical Technologies Inc.
Hemisphere Energy Corporation
Lupaka Gold Corp.
Americas Petrogas Inc.
Intellispharmaceutics International Inc
Pan African Oil Ltd.
By far the most material is Helius Medical Technologies, where the company owns 1.3MM shares and 650,000 warrants which they acquired for $650,000. The carrying value of those securities is now over $4.3 million. Therefore, the prospects for Helius will materially affect the prospects for Rockshield.
Junior medical device companies are outside my circle of competence, so I'm only assigning value to the cash and putting the investments in the margin of safety bucket, giving me a price target of $0.11.
My price target of $0.11 is also material because that is the strike price of the 15 million warrants the company issued when they raised capital this summer. Unfortunately, they raised it materially below the value of the company, which provides doubt as the seriousness of their capital allocation. Nevertheless, the company is trading at a valuation where I would expect good things to happen, and their track record with the investments is excellent so far based on the Helius success.
Disclosure: Long RKS
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