Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: orion on November 26, 2013, 09:39:32 AM

Title: PDRX - PD-Rx Pharmaceuticals
Post by: orion on November 26, 2013, 09:39:32 AM
I´ve seen a discussion about PDRX here before but i think this little company deserves its own thread.  For a nice overview and a great write up, I would recommend the post on the Alpha Vulture blog http://alphavulture.com/2013/11/04/pd-rx-pharmaceuticals-obvious-cheap/

The company is quite cheap and should appear even cheaper when they release their 2013 report. What especially grabbed my attention was a comment made by one of the readers of the above blog. Stating that one of PDRX´s largest competitors was shut down by the owner. But not because they were unprofitable but because this company caused concers with customers in other parts of the larger holding company.

So in the end this could be positive for PDRX.

Any opinions?
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: wknecht on November 27, 2013, 07:05:06 AM
Definitely cheap. Another idea I poached from the board. Thanks to Nate or whoever originally mentioned this one a little while ago.

Has anyone received their annual report? Expected to by now because the date on the 2012 one was November 2. Figure they send this out before posting on their website.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Hielko on November 27, 2013, 07:10:46 AM
The 2011 AR was released at the end of December: they don't follow a fixed schedule, so it could take some time before it's released.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: wknecht on November 27, 2013, 07:15:29 AM
Right. Just looked at some of the older ones too, one was as late as the end of March.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: orion on December 10, 2013, 05:29:50 AM
Just found this on Youtube: http://www.youtube.com/watch?v=a4Kl3l0eCcA
A demo of their Dispensing System.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: no_thanks on December 10, 2013, 05:47:58 AM
Hi,

Earlier this summer I sent emails to the COO Jack McCall, and did not get a response.  I then sent letters to a list of owners from an old filing from the early 2000's I found, mainly Management and family of Management, trying to get them to buy back shares.  I had no luck with that either.  I did hear that someone has has had some good contact with Mr. McCall, so if you are out there, I would love to hear what you did differently than I did to start a constructive dialog. 

The big question for me is what they are going to do with all the cash?  If margins came up a bit too, that would be nice too.  I will post if I get the report in the mail. 
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: no_thanks on January 02, 2014, 03:35:10 PM
Annual Report came out.  Looks really good to me.  Let me know what you think!
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: no_thanks on January 02, 2014, 03:55:47 PM
Really happy that they repurchased 44,609 shares at avg. price of $2.74.  Hopefully they continue to do that.  It is really a no brainer at this price level and debt level.  Great year all around in my opinion.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Hielko on January 02, 2014, 04:03:02 PM
I suspect that the share repurchase is from an employee that left or something like that since I don't think there was enough trading volume to buy that on the open market. I do think the share repurchase is good news, but I don't directly think this will be a recurring event nor do I think this implies anything (positive or negative) about the capital allocation skills of the management team.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: no_thanks on January 03, 2014, 05:19:15 AM
I suspect that the share repurchase is from an employee that left or something like that since I don't think there was enough trading volume to buy that on the open market. I do think the share repurchase is good news, but I don't directly think this will be a recurring event nor do I think this implies anything (positive or negative) about the capital allocation skills of the management team.

Yes, that sounds right to me.  They put a lot more effort into the report this year, which taken by itself doesn't matter, but hopefully it means that they are going to spend more time on getting the share price more in line with the companies value.  Why they don't take it private is a mystery to me.

Happy New Year.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: mbrock77 on January 03, 2014, 09:34:41 AM
Anyone have any thoughts or concerns about the jump in accounts receivable?
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: JAllen on January 03, 2014, 09:41:56 AM
Anyone have any thoughts or concerns about the jump in accounts receivable?


They attributed it in the letter to an investment in a project, which is something less-capitalized competitors can't do.


Can anyone explain to me the changes in the company's COGS and SGA since 2008?  Gross margins have gone way up but so have operating expenses, leading to similar net profit margins overall.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: phil_Buffett on January 05, 2014, 08:51:47 AM
so the Company trades for low valuation. why they dont take it private?

and what i also not understand is, why they disclose almost no Information about Insider ownership, cash flow, and so on...
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: bookie71 on August 21, 2014, 11:36:41 AM
Since their year end is June 30, does anyone know when the annual report will be out?  I sent an email to company but haven't received an answer.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: gary17 on August 21, 2014, 12:06:21 PM
Hi Bookie
their 2013 report was created by Jack McCall dated Dec 23, 2013...
So perhaps the 2014 report would be issued around then?
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: yadayada on August 21, 2014, 01:16:50 PM
are they planning to do something with the cash? Why would they keep several years of earnings of cash on the balance sheet.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: writser on August 21, 2014, 02:21:57 PM
No clue. Obviously disclosure is very limited. Good thing is you don't really have to care at 3x EV/EBIT :) . The number is probably even better given that we're 14 months ahead of the latest report. Also the cash balance is not that impressive imho - I can imagine they want to keep 1 or 2 million in cash so we're talking 2 / 3 years of earnings.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: orion on December 18, 2014, 06:36:00 AM
Earnings out. WOW! Net income $1.9M
http://www.pdrx.com/docs/2014AuditorsReport.pdf
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: mbrock77 on December 18, 2014, 07:06:16 AM
Hope they do something smart with all that cash!
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Hielko on December 18, 2014, 07:18:11 AM
Pretty solid result :)
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: bookie71 on December 18, 2014, 12:59:11 PM
Looks like they bought 49,424 shares of stock back during the fiscal year.
Net book value increased from 4.71 to 5.91
they also reduced their current liabilities quite a bit
I wonder why it took so long to do the audit? (6-30 to 11-5) (this is the old auditor in me, asking

Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Travis Wiedower on December 19, 2014, 12:22:31 AM
I wonder why it took so long to do the audit? (6-30 to 11-5) (this is the old auditor in me, asking

While I don't know the answer, I don't think it's anything to be concerned about. I've seen similar time frames with several other dark companies. Just not a priority of theirs it seems.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: KJP on December 17, 2015, 07:16:12 AM
2015 results out:  http://ftp.pdrx.com/docs/2015AuditorsReport.pdf

Very tough year.  The accompanying letter ascribes the decline in sales to one drug.  I didn't see any commentary on how FY2016 is going.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: mbrock77 on January 15, 2016, 06:52:55 AM
Not good?

http://www.business-standard.com/article/pti-stories/wockhardt-tanks-15-on-issues-over-shendra-plant-drug-recall-116011500742_1.html

Wockhardt shares today slumped 15 per cent after the USFDA made nine 'observations' highlighting violations of its norms at the drug maker's new facility at Shendra in Aurangabad and recall of 62,555 bottles of its antibiotic tablets by PD-Rx Pharmaceuticals in the US market.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: abitofvalue on January 15, 2016, 10:51:33 PM

This recall seems to have started last year, so hopefully was the main cause of "the loss of market demand" they discussed in the annual though that would be a strange way to describe this situation (which makes me think that this is extrememly wishful thinking on my part).  Either way, the lack of information the company discloses does make it somewhat challenging to follow. 

 http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/62500-bottles-of-wockhardts-antibiotic-tablets-recalled-in-us/articleshow/50581216.cms

Quote
This nationwide Class II recall is on account of "the original manufacturer's recall, in which the firm did not adequately investigate customer complaints," the United States Food and Drug Administration (USFDA) said in its latest Enforcement Report.

The tablets are in the strengths of 250 mg (45,022 bottles) and 500 mg (17,533 bottles), it added.

As per the report, the voluntary recall initiated on April 29, 2015 is ongoing.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: KJP on December 24, 2016, 06:42:35 AM
2016 Financials are out:  http://ftp.pdrx.com/docs/2016AuditorsReport.pdf
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: wachtwoord on December 24, 2016, 07:12:45 AM
2016 Financials are out:  http://ftp.pdrx.com/docs/2016AuditorsReport.pdf

At first glance it looks like things haven't improved since last year.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: KJP on December 24, 2016, 11:16:44 AM
At first glance it looks like things haven't improved since last year.

Improved for whom?  Management's cash bonus is based on "a percentage of gross sales" (see Note E to audited financials) so things appear to have improved a bit for them.

Because of management's poor capital allocation, this is turning into a cash box that generates single-digit ROE.  Management also has no reason to care about the stock price until they choose to sell, so I wouldn't expect any changes until then.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Green King on December 24, 2016, 01:03:42 PM
At first glance it looks like things haven't improved since last year.

Improved for whom?  Management's cash bonus is based on "a percentage of gross sales" (see Note E to audited financials) so things appear to have improved a bit for them.

Because of management's poor capital allocation, this is turning into a cash box that generates single-digit ROE.  Management also has no reason to care about the stock price until they choose to sell, so I wouldn't expect any changes until then.
+1
Earning 5% on current assets less debt. This business is worth more dead than alive.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: writser on December 24, 2016, 04:14:27 PM
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.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: KJP 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. 
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: writser 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.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: KJP 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. 
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Tim Eriksen 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.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Partner24 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!
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: writser on June 05, 2017, 01:44:40 PM
Yes, good to see.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: jawn619 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.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: oddballstocks 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.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Sharad 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.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: watsa_is_a_randian_hero 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.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Tim Eriksen on June 12, 2017, 10:53:08 PM
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.

Per my notes, I called them about this back in 2013 or 2014.  They told me the government contract had no meaningful revenue in 2013.  If you read the release that makes sense. 
"The award is a fixed-price with economic price adjustment, indefinite-delivery/indefinite-quantity contract with a maximum $46,491,184 to provide pharmaceutical surge, re-supply and sustainment material."  Indefinite delivery and quantity sound like a contract for some potential scenario that may or may not happen.  I assume the government had a contract in place in case of some type of emergency/terrorist act.

The 2015 annual report said the decline in sales was due to the loss of a single drug that they would not name.  I don't think it had anything to do with the government contract.   

As for the 1.5x sales, it does seem high, but some little companies spend a lot on SG&A that is really management perks, so you never know until you do due diligence. 
 
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Hielko on June 13, 2017, 01:42:04 AM
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.
Not paid here either.

I think they ran into some problems with the FINRA because announcing a dividend after the ex-date is not okay. No idea how this will be resolved though, my guess is that the stock is now still not trading ex-div (despite what IB is showing).
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Hielko on June 14, 2017, 12:35:30 AM
Dividend just got paid yesterday, seems it is back dated so it was payed a week ago effectively.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: watsa_is_a_randian_hero on December 18, 2017, 01:26:35 PM
does anyone know when the financials are due out?
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: watsa_is_a_randian_hero on December 23, 2017, 03:15:36 AM
does anyone know when the financials are due out?

anyone out there still?  these appear to be overdue
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: bookie71 on December 23, 2017, 11:57:00 AM
They appear to come out in late Dec or early Jan
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: bookie71 on December 27, 2017, 04:53:26 PM
It is out
http://ftp.pdrx.com/docs/2017AuditorsReport.pdf
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Partner24 on December 28, 2017, 08:53:56 AM
A very very cheap stock. Lot of cash, low debt, generate free cash. Gives dividends. Conservative. But in the end, what will they do with that pile of cash? Stock buybacks? Dividends? Expanding the business? Keep it indefinitely?
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: aalexa1225 on December 28, 2017, 12:09:17 PM
Anyone know what insider ownership looks like?
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Jurgis on December 28, 2017, 12:36:56 PM
Anyone know what insider ownership looks like?

I was going to check on OTC markets, but they say Pink/No Info, so I did not dig further, since I won't be able to buy it anyway:
https://www.otcmarkets.com/stock/PDRX/quote
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Tim Eriksen on December 28, 2017, 01:25:28 PM
Only one I have ever seen is from an SEC filing from 2000.  It showed the CEO at just under 20%.  Officers and Directors another 10%.  Two other large shareholders with 25% and 9% respectively. 
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: writser on December 28, 2017, 01:29:18 PM
Officers and directors own slightly more than 50% afaik.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Foreign Tuffett on January 10, 2018, 10:01:47 AM
I'm puzzled by PDRX trading so cheaply. Obviously it's an extremely illiquid nano cap that doesn't file with the SEC and trades OTC, so it probably deserves to trade at a discount. But a 1.9 EV to TTM operating profit ratio? A over 40% free cash flow to EV yield? Slightly less than NCAV for a consistently profitable company?

I think this is being priced off its P/E ratio, which at 16.4X, doesn't appear to be much of a bargain. The difference of course lies in PDRX's large cash and cash equivalent holdings. 

As even a cursory reading of the shareholders' letters makes clear, management is conservative and believes that being well capitalized is a competitive advantage. A CEO that didn't care whatsoever about shareholder value though, probably wouldn't make statements like the below. Actually they probably wouldn't write shareholder letters at all.

2013 Annual Report: "This is a shareholder owned company and I as well as all our management recognize the stewardship responsibility you have bestowed upon us."

2014 Annual Report: "In closing, this is a shareholder owned company, we will always be mindful of the trust you place in our stewardship of this company."

2015 Annual Report: "We recognize the responsibility you have placed in our management team. We strive every day to move forward in an ever changing world."

Also, if the company is ever sold shareholders should do incredibly well, as an acquirer would have to pay something approaching fair value for the operating business, which currently is being valued at very little ex-cash.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Tim Eriksen on January 10, 2018, 10:05:05 AM
The 5% yield lessens the risk that management squanders the cash.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Foreign Tuffett on January 10, 2018, 10:21:07 AM
The 5% yield lessens the risk that management squanders the cash.

Agreed, though I think management is unlikely (based on their track record) to attempt a big empire building-type acquisition, dividend or no dividend. They seem much more like the "there's danger around every corner, therefore we should hold plenty of cash" types.

I do think that last year's dividend is a signal that management is comfortable with the size of its cash hoard, and doesn't see amassing cash as an end in itself.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: KJP on January 10, 2018, 11:25:52 AM
The 5% yield lessens the risk that management squanders the cash.

Agreed, though I think management is unlikely (based on their track record) to attempt a big empire building-type acquisition, dividend or no dividend. They seem much more like the "there's danger around every corner, therefore we should hold plenty of cash" types.

I do think that last year's dividend is a signal that management is comfortable with the size of its cash hoard, and doesn't see amassing cash as an end in itself.

1.  At least initially, the dividend was described as "one-time."  [Source: http://www.pdrx.com/pressreleases.html]  Has management stated that they will start paying dividends regularly?

2.  Investing in "cash boxes" is boring and requires a lot of patience, so I suspect many people don't do it for that reason alone.  Relatedly, I was playing around with IRRs on an investment in PD-RX depending on various assumptions.  In connection with that exercise, I'm curious:  What's the maximum you would pay today for shares of PD-RX?

Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Partner24 on January 10, 2018, 11:49:11 AM
I've been a shareholder since approximately 5 years and so far I'm very satisfied. The business is boring, cash flows are positive, the balance sheet is great, the management is conservative, the stock price is very cheap. IMO, the intrinsic value is far higher than the actual market price. But since it is a pink sheet, I can't invest in it in a RRSP account, so the investment is limited. The only other boring, cash flow positive, cash rich and cheap company that I've found so far is CGA.

If you have other ideas like these, I'm very interested to hear them. 

Regarding the cash returns to the shareholders, they did a stock repurchase in the past (was a great idea), then they declared dividends after that (good idea too). I would guess that they want to keep flexibility, so they don't declare those cash returns as a repetitive thing...
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: KJP on January 10, 2018, 12:27:26 PM

If you have other ideas like these, I'm very interested to hear them. 


You may be interested in:
George Risk Industries (RSKIA)
Advant-E Corporation (ADVC)
Parkit (PKT; PKTEF)
Command Center (CCNI)
Pacific Health Care Organization (PFHO)
Innovative Food Holdings (IVFH)
Evergreen Gaming (TNA)
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Partner24 on January 11, 2018, 05:41:08 AM

If you have other ideas like these, I'm very interested to hear them. 


You may be interested in:
George Risk Industries (RSKIA)
Advant-E Corporation (ADVC)
Parkit (PKT; PKTEF)
Command Center (CCNI)
Pacific Health Care Organization (PFHO)
Innovative Food Holdings (IVFH)
Evergreen Gaming (TNA)

I'll have a look. Thank you very much!
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: writser on January 11, 2018, 07:00:19 AM
Or some foreign stuff:

Nam Lee pressed metals
Ming Fai Holdings
PNE Industries
Alco Holdings
And basically every company in Japan (Isamu paint, Uehara Sei Shoji)
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: no_free_lunch on January 12, 2018, 05:15:37 PM
I think you guys might have actually moved the market on this.  It's up 10-15% over the past few days.  Was just getting to the point where I was ready to build a position.  It still seems reasonably priced but given where it was trading oh, back on tuesday it is hard to buy at these levels.  I think though that if I wasn't aware of past history I would still be a buyer right now.  Funny how that works.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: no_free_lunch on January 13, 2018, 05:10:17 AM
PDRX pays a 39% tax rate.  I am not sure of the tax reform impact but if it drops the rate by 13% (I heard that was the standard drop but correct me if I'm wrong) that would increase earnings by almost 20%.  The $.36 earnings last year would go up to $.44 without any growth assumptions.   That translates to a 15pe with all that cash thrown in for free.

The way I see it, as far as modeling it:

$.44 earnings * 12 multiplier (it's a specialized retailer, seems quite conservative) = $5.28

I think you can also split the cash out now that they are paying a dividend.  The multiple would go up if there is ever a special dividend.

$4.15 cash & equivalent * 0.6 holding company discount  = $2.45

Total conservative NAV = $7.73

Based on this, it still seams reasonably priced. 
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: KJP on January 13, 2018, 08:09:53 AM

I think you can also split the cash out now that they are paying a dividend. 

The press release accompanying the 2017 dividend referred to it as a "one-time" dividend.  Has management now said that they intend to pay regular dividends?
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: writser on January 13, 2018, 09:15:07 AM
Nope, they have not. However, it's a sign in the right direction and I wouldn't be surprised if they do it again this year.
Title: Re: PDRX - PD-Rx Pharmaceuticals
Post by: Foreign Tuffett on January 13, 2018, 10:37:13 AM
I think you guys might have actually moved the market on this.  It's up 10-15% over the past few days.  Was just getting to the point where I was ready to build a position.  It still seems reasonably priced but given where it was trading oh, back on tuesday it is hard to buy at these levels.  I think though that if I wasn't aware of past history I would still be a buyer right now.  Funny how that works.

I also struggle with my thinking getting "anchored" to whatever the stock price is when I begin looking at an idea.

P/E isn't one of my preferred valuation metrics, but directionally I agree with you. At $6.75 per share, 2017's enterprise value / operating profit is ~3.36, which looks very cheap on a purely quantitative basis. I think it looks even cheaper when you start to think about this business qualitatively (consistently profitable, owner-operator management, has been around 30 years, etc.).

I think their income tax rate next year will no higher than of 27% (6% Oklahoma state corporate income tax rate + new 21% federal max rate). Note that I'm not a tax attorney and am only broadly familiar with the new tax bill.

Assuming operating performance doesn't significantly deteriorate, I think it's quite likely a dividend will be declared again this year, especially considering the newly lowered tax rate.

I hope this doesn't come off like I'm trying to pump this stock. I just think that if someone was able to put together a portfolio of solid companies like PDRX at prices similar to where it's currently trading, they would likely do extremely well. This is basically the idea behind "The Acquirer's Multiple" quantitative strategy. Note that PDRX would be the single cheapest company in The Acquirer's Multiple's Large Cap 1000 if it were included in that index (yes, I'm aware PDRX is a nano cap and not a large cap). If you exclude the two ADRs at the top of the list, PDRX is nearly three turns cheaper than the cheapest US-based large cap. 

https://acquirersmultiple.com/screener/large-cap/ (https://acquirersmultiple.com/screener/large-cap/)