Author Topic: PDRX - PD-Rx Pharmaceuticals  (Read 33145 times)

KJP

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #30 on: December 31, 2016, 06:26:20 AM »
Yes, that's the bear case. The bull case is that you get the business for free!

Book value has compounded by 11% annually for over 16 years now despite the excess cash. This is actually a reasonable business. Insiders are all in their sixties / seventies, have been working for 30+ years and own 52% of the company. At some point within a few years they will unlock the value on the balance sheet and the stock will react. Key question is whether that is worth waiting for.

I think the business itself is fine.  But excess cash has been building for many years.  The bigger the cash pile is -- particularly in a low-rate environment -- the harder it is to keep compounding book value at double-digit CAGR.  That's why I think that, even assuming no change in the underlying business, historical book value CAGR is not a good proxy for future CAGR of book value unless capital allocation changes.  I would say the same thing about other nano-caps with similar capital allocation policies and no reasonable likelihood of activism, like George Risk, though that company has started a dividend that partially addresses the issue.   

I also question whether you get the business for free.  I assume you mean that the company's current cash and cash equivalents essentially equals its market cap.  But cash on the company's balance sheet is not cash in your pocket.  What is $1 of cash on PD-RX's balance sheet actually worth today to a minority shareholder who has no reasonable expectation that the cash will either be (i) paid out anytime soon; or (ii) put to productive use by the company?

You are right, though, that a buyer at today's prices should do well if the business were sold relatively soon.  If you could find a basket of companies like this with old founder-owners and no heirs in the business, I think you'd do well over time. 


writser

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #31 on: December 31, 2016, 06:47:31 AM »
I would add that the excess cash is a relatively new 'problem'. Just three years ago they had 4m in cash, 5m in receivables and 3m in liabilities. Which I would call (too) conservative, but not exactly cash hoarding - especially considering annual revenues are 25m+. The older these guys get and the more cash PD-RX accumulates, the bigger their incentive to do something with it. Until then PD-RX is a savings account that yields 5% - not bad. Also, "the company is currently beginning and evaluating new opportunities which will dictate capital allocation for the next year. At an appropriate time the board will consider the cash demands of those opportunities and other capital allocations for the next two years.". I would not be surprised to see something happening this year or the year after that. Seems unlikely they will spend all their money on a reckless acquisition after running this company conservatively for 30 years. My best guess would be a few investments in the business and a small dividend.

That said, this is not my best idea but it seems like a safe place to park some money for patient investors.
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KJP

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #32 on: December 31, 2016, 07:18:01 AM »
That said, this is not my best idea but it seems like a safe place to park some money for patient investors.

Despite my bellyaching on this thread, I largely agree and still hold. 

Tim Eriksen

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #33 on: June 05, 2017, 08:10:03 AM »
OKLAHOMA CITY, June 5, 2017 /PRNewswire/ -- The Board of Directors of PD-Rx Pharmaceuticals, Inc., a publicly held corporation, (Symbol: PDRX) today announced that it has declared a one-time dividend of $.30 per share payable on June 7, 2017 to shareholders of record at the close of business May 31, 2017.  This dividend represents a 5% projected annual yield utilizing the May 11, 2017 closing market price of $5.75.

Partner24

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #34 on: June 05, 2017, 09:18:17 AM »
Still a cheap stock in wich I hold a significant % of my portfolio. Great balance sheet. Cash flow positive. Conservatively managed.

A stock buyback would have been a good choice, but I guess that the stock is so illiquid it would have been tought to do that. So a dividend make sense.

Cheers!

writser

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #35 on: June 05, 2017, 01:44:40 PM »
Yes, good to see.
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jawn619

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #36 on: June 05, 2017, 05:46:52 PM »
I talked with management. They said they would sell the company for 1.5x Sales. I told them they would never get that price.

oddballstocks

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #37 on: June 05, 2017, 06:01:44 PM »
I talked with management. They said they would sell the company for 1.5x Sales. I told them they would never get that price.

I'm guessing you've never sold a company.  This is how you do the dance.

The great news here is management gave a number.  That says they've thought of this, and they have a price they'd take.  Companies that aren't willing to throw out something/anything aren't worth talking to.  This is on both sides of the table.  Don't ever waste your time trying to sell a company to another company that won't name a price.  A fixed price is always the starting point, from there it's negotiated.

Maybe 1.5x sales isn't that crazy.  There are a lot of these small companies that sell at crazy multiples to a strategic acquirer.  Think of this as if you were purchasing a tuck-in.  You could take out 30% or more of the expenses and at that point you're looking at maybe 2m in net income, is 15x that crazy? Doesn't seem like it.
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Sharad

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #38 on: June 05, 2017, 07:10:20 PM »
I talked with management. They said they would sell the company for 1.5x Sales. I told them they would never get that price.

I'm guessing you've never sold a company.  This is how you do the dance.

The great news here is management gave a number.  That says they've thought of this, and they have a price they'd take.  Companies that aren't willing to throw out something/anything aren't worth talking to.  This is on both sides of the table.  Don't ever waste your time trying to sell a company to another company that won't name a price.  A fixed price is always the starting point, from there it's negotiated.

Maybe 1.5x sales isn't that crazy.  There are a lot of these small companies that sell at crazy multiples to a strategic acquirer.  Think of this as if you were purchasing a tuck-in.  You could take out 30% or more of the expenses and at that point you're looking at maybe 2m in net income, is 15x that crazy? Doesn't seem like it.

I used to be an investor in PD-RX (I found it via discussions on your blog, oddball - what a find!). However, in 2014, what struck me as odd was the concentration of revenue from one "product" of 49%. I tried to dig around on this, and I believe it was a government contract that wasn't renewed, or renewed at a much reduced rate (below the threshold for disclosure on the DoD website).

Here is the contract that was awarded in 2013:

http://www.veteranstodayarchives.com/2012/06/28/u-s-department-of-defense-contract-awards-131/

Here is the contract that was awarded in 2014:

http://www.militaryindustrialcomplex.com/contract_detail.asp?contract_id=23788

As I mentioned, since 2014, I couldn't find an announcement anywhere regarding a renewal of said contract, and per the notes to the financials, the revenue generated from the concentration of revenue has greatly reduced. Therefore, I moved past this company (it's too difficult and time-consuming to build a big position), but my assumption is that these big contract awards propped up the normal revenue stream of the company, and they have been very inconsistent over the last few years (in terms of magnitude of the contracts), and the government has decided to spread their procurement to multiple suppliers, or reduced their demand for the pharma products they procured from PD-RX.

The dividend is nice, but I too agree that the 1.5x sales price tag seems high given the dependence on government contracts.
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watsa_is_a_randian_hero

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Re: PDRX - PD-Rx Pharmaceuticals
« Reply #39 on: June 12, 2017, 09:49:24 PM »
on the dividend - have others received it?  The press release indicated payable on June 7, but interactive brokers still shows the dividend as "accrued" in my account and not yet paid.