PDH - Premier Diversified Holdings Inc.

[Parsad]

Can someone answer this question;  the requirements to be an accredited investor in MPIC LP fund 1 ( US )?

 

If the answer is the same as an accredited investor in the US then you must have either $1M+ in investable assets or an income of $200K+ for the last 2 years (and expect the same for this year).  I don't know if it being a Canadian fund changes things.

I assume that becoming an investor in MPIC LP fund mean that you have to file foreign ownership with IRS?

 

I think he has a U.S. entity, so it wouldn't be foreign.

 

Correct.  Cheers!

[Parsad]

Based on the deteriorating fundamentals of PDH, we see more similarities than differences.  I do not think you can claim PDH is not SHLD until PDH has actually turned around and is growing. 

 

What I will tell you is that we are not a Sears Holding Company!  Cheers!

 

What deteriorating fundamentals are you referring to? 

 

- We have no large pension liability. 

- Our businesses are headed towards cash flow positive positions rather than increasing losses when you back out the capital being spent on Sequant Re. 

- We have little in other liabilities. 

- We have a healthy and positive quick ratio compared to Sears. 

- We have other investments that are liquid or will be making large distributions over the next two years. 

- We have positive equity. 

- The intrinsic value of our Burnaby clinic business isn't even accounted for in our books under IFRS.

 

You are incorrect in your comment about similarities.  You are correct about proving that we are different...the proof is in the pudding for any business...not just PDH.  Cheers! 

[benchmark]

 

- Our businesses are headed towards cash flow positive positions rather than increasing losses when you back out the capital being spent on Sequant Re. 

 

 

Do you plan to time-box (or better yet $-box) SequentRe's investment?

[CONeal]

Wondering why everyone's expectations of Sequant Re becoming a fully operational self supporting business is so much faster then mine.  The company started from 0 and on top of that it is in the insurance industry, that tends to move a lot slower then other industries.  Maybe it's just my background working on the marketing side of insurance and banking.  Things tend to move a lot slower inside organizations then some of your expectations.  Two years is really not much time at all for a new product in the insurance industry, at least from what I have seen in regards to how fast we move to innovation on the insurance side of the house. 

 

I get the feeling that some of y'all expect this business to pick up along the lines of adoption of some fast paced web app.  It just does not work that way.  The way I am comparing it is to more of an Ebix model.  Where you have small operating income until you have a track record.  Then as the bigger boys come on, business will increase very fast as not only the initial big target but also all the smaller companies that support the big target.  Two years is really no time at all for Sequant Re.  Especially when you consider the time it would take internally (within the big company) to adopt this technology.

 

As far as limiting the investment in Sequant Re, in my view this would not be wise.  Currently I believe we own 44% of the company.  Not only would stoping the investment put a strain on a company that is basically an infant, it would also make it more expensive down the line to purchase the company outright.  (Have a feeling this is the goal if it becomes successful). 

 

My personal belief is not to judge anything regarding Sequant Re until after 5 years of operation.

[CONeal]

Did anyone attend the annual meeting?  Would really like to see some notes if anyone took any. 

[Parsad]

Did anyone attend the annual meeting?  Would really like to see some notes if anyone took any.

 

We had about 20 people attend, not including the proxy scrutineers...12 were shareholders and 8 were directors, staff, management.  There were at least 4 shareholders who are members here that attended...not including yours truly. 

 

The powerpoint will be on the website later this evening.  I can't speak for the shareholders, but my impression was that virtually all left feeling better about where the company is headed...including both long-term and more recent shareholders.  What I can say with certainty is that company morale is in a very good place in terms of goals, opportunities and prospects for PDH's future.  Cheers!

 

[RichardGibbons]

Hey Sanjeev, in the HCG.to thread, you say the following about the Vancouver housing market:

 

But I suspect when this thing blows, it will be a much larger bubble than if they had pricked it a few years ago.  Now it could prove to be quite painful for institutions and especially the average consumer!

 

This seems to imply that you believe that the Vancouver housing market is in a bubble, yet Premier has been investing in Vancouver real estate (which has been a correct decision based on price appreciation to date). 

 

What's your reasoning here?  That the prices you're doing these deals at have such a large margin of safety that it doesn't matter if Vancouver real estate collapses while Premier is financing these developments?  That Premier will get out before the bubble pops?

 

I've been curious about that investment for months, so I was wondering if you could explain the apparent incongruity between believing in the bubble, but still investing in Vancouver real estate.

[Parsad]

Hey Sanjeev, in the HCG.to thread, you say the following about the Vancouver housing market:

 

But I suspect when this thing blows, it will be a much larger bubble than if they had pricked it a few years ago.  Now it could prove to be quite painful for institutions and especially the average consumer!

 

This seems to imply that you believe that the Vancouver housing market is in a bubble, yet Premier has been investing in Vancouver real estate (which has been a correct decision based on price appreciation to date). 

 

What's your reasoning here?  That the prices you're doing these deals at have such a large margin of safety that it doesn't matter if Vancouver real estate collapses while Premier is financing these developments?  That Premier will get out before the bubble pops?

 

I've been curious about that investment for months, so I was wondering if you could explain the apparent incongruity between believing in the bubble, but still investing in Vancouver real estate.

 

The Kingswood projects we are in are on the lower end...townhouses between $650K to $850K.  There is an enormous lack of supply in the townhouse market, unlike condos and detached homes over $1.5M.  So while the townhouse sector would take a hit, it would not be affected like the condo market or detached home market.  These projects will also soon be going to presales, and we have no other real estate projects planned. 

 

The main pain will be in all of these HELOCs with their variable rates...secured and unsecured...and the sudden increase in financing costs that the consumer will face.  The average consumer does not even have enough in liquid assets to survive for more than a month if they lose their job.  There will be no way they could support higher finance charges if rates moved up 2-3%.  With increased consumer/auto loans and higher credit card balances, combined with their HELOCs, any economic recession or sharp increase in interest rates will impact the consumer's ability to service their debt load. 

 

To put it as bluntly as I can, I don't think I've seen Canadian balance sheets this leveraged since the 1981 crash in real estate.

Interest rates increased to 18% back then from about 6-7%.  We're at 2% and these balance sheets are stretched and barely serviceable.  What happens if rates move just to average historical rates...4-5%?  What if Canada faces hyperinflation because it has to support the Canadian dollar and interest rates move to 10%?  Few people think about these things because they always seem so remote...until they happen!  Cheers!

[petec]

 

To put it as bluntly as I can, I don't think I've seen Canadian balance sheets this leveraged since the 1981 crash in real estate.  Interest rates increased to 18% back then from about 6-7%.  We're at 2% and these balance sheets are stretched and barely serviceable.  What happens if rates move just to average historical rates...4-5%?  What if Canada faces hyperinflation because it has to support the Canadian dollar and interest rates move to 10%?  Few people think about these things because they always seem so remote...until they happen!  Cheers!

 

Most of the world looks like this at some level today.  UK mortgages, for example, are almost 100% floating rate, and mortgage debt is huuuge.  There are only two possible ways out, short of a depression: vast productivity growth (not looking very likely) or inflation.  What will be very interesting to see is whether central banks adhere to their inflation targets or allow it to rise without doing much to rates. 

[Spekulatius]

 

 

Most of the world looks like this at some level today.  UK mortgages, for example, are almost 100% floating rate, and mortgage debt is huuuge.  There are only two possible ways out, short of a depression: vast productivity growth (not looking very likely) or inflation.  What will be very interesting to see is whether central banks adhere to their inflation targets or allow it to rise without doing much to rates.

 

The fact that most of the world looks like that, does not really make the situation any better. You can't justify a bubble without similar bubble somewhere else. Something gotta give at some point and it won't be pretty. FWIW compared to Canada, housing in the US appears to be quite reasonably valued.

[petec]

I wasn't justifying it.  It's more that the situation looks all too familiar.

[RichardGibbons]

The Kingswood projects we are in are on the lower end...townhouses between $650K to $850K.  There is an enormous lack of supply in the townhouse market, unlike condos and detached homes over $1.5M.  So while the townhouse sector would take a hit, it would not be affected like the condo market or detached home market.  These projects will also soon be going to presales, and we have no other real estate projects planned. 

 

Ah, I understand your reasoning.  Thanks, Sanjeev.

[rkbabang]

The Kingswood projects we are in are on the lower end...townhouses between $650K to $850K.  There is an enormous lack of supply in the townhouse market, unlike condos and detached homes over $1.5M.  So while the townhouse sector would take a hit, it would not be affected like the condo market or detached home market.  These projects will also soon be going to presales, and we have no other real estate projects planned. 

 

Ah, I understand your reasoning.  Thanks, Sanjeev.

 

I understand it as well, but it still sounds risky to me.  Even a deal like this would lose money if the bubble popped at the wrong time.  The high end is going to take down everything under it when it falls.  Things always overcorrect at first.  It just seems like trying to make an easy profit on the expanding bubble in an area that won't pop quite as badly when it does.  I sure hope PDH doesn't do any more Canadian real estate investments, at least until after the bubble does pop.

 

[CassiusKing1]

Did the powerpoint get posted yet?  I’ve looked for it and can’t find it.  Although it’s very possible I’m not looking in the right place.  Can somebody provide a link?  Thanks!

[lschmidt]

http://www.pdh-inc.com/investors.html

 

Click on "2017 AGM Presentation"

[CassiusKing1]

Thanks!

[ourkid8]

It seems like we are getting into the custom cabinet and skin cancer treatment business. 

 

"The Issuer's management incorporated a new partially owned subsidiary, Greenway Millworks Inc., which will be a custom-made cabinetry company. "

 

"The Issuer’s wholly-owned subsidiary, Premier Diagnostic Center (Vancouver) Inc. entered into a non-binding letter of intent with a German company to acquire Canadian rights to provide a certain

skin cancer treatment."

 

http://thecse.com/sites/default/files/PDH_-_CSE_Form_7_-_Monthly_Report_April_2017_FINAL.pdf

 

[rjstc]

It seems like we are getting into the custom cabinet and skin cancer treatment business. 

 

"The Issuer's management incorporated a new partially owned subsidiary, Greenway Millworks Inc., which will be a custom-made cabinetry company. "

 

"The Issuer’s wholly-owned subsidiary, Premier Diagnostic Center (Vancouver) Inc. entered into a non-binding letter of intent with a German company to acquire Canadian rights to provide a certain

skin cancer treatment."

 

http://thecse.com/sites/default/files/PDH_-_CSE_Form_7_-_Monthly_Report_April_2017_FINAL.pdf

 

I'd be interested to know where you found this information if you don't mind. I am a stockholder and don't remember seeing this before. Thanks

[MarioP]

It's in the report linked. Paragraph 1 for the cabinet maker and 5 for cancer treatment.

[rjstc]

It's in the report linked. Paragraph 1 for the cabinet maker and 5 for cancer treatment.

 

My question was where did you get the form 7 monthly progress report? I have never seen that before. I would like to be able to see this on a monthly basis. Thanks

[jimjam]

rjstc: Look at:

 

http://thecse.com/en/listings/diversified-industries/premier-diversified-holdings-inc

 

In the right hand column there is a box "CSE Filings" (you may have to scroll down). Click "View All" to see all the monthlies.

 

Cheers.

 

[rjstc]

rjstc: Look at:

 

http://thecse.com/en/listings/diversified-industries/premier-diversified-holdings-inc

 

In the right hand column there is a box "CSE Filings" (you may have to scroll down). Click "View All" to see all the monthlies.

 

Cheers.

 

Perfect. Thanks much. Ron

[redhots]

Half of incumbent insurance companies expect to lose 20% of their business to disruptive startups within five years, PwC survey finds

 

[CONeal]

I'll give you the simplest explanation, but as you know, nothing is necessarily as simple as it sounds! 

 

ILS, or insurance-linked securities, are essentially securitized products based on underlying insurance contracts.  Unlike normal reinsurance companies, that use a significant amount of asset to equity leverage and other reinsurance products to offset risk, insurance-linked securities are fully-collateralized...thus the brokerage has very little...virtually no...insurance risk. 

 

Where the brokerage makes money is by taking a percentage of the gross premiums as an underwriting fee and on any gain in the underlying capital collateralizing the insurance risk.  The downside to ILS is the lack of use of leverage and float, but the upside is no exposure to underwriting risk and unlimited capacity to underwrite risk. 

 

That being said, as an ILS brokerage builds its book of contracts, and generates significant annual income, it can set up another insurance subsidiary that is fully-capitalized by its retained earnings, that could eventually underwrite reinsurance risk directly like any other reinsurer.  Thus benefiting from asset to equity leverage and the long-term benefits of insurance float. 

 

Again, it's a lot more complex than this, especially what SequantRe is trying to do, but this simplifies it a bit.  Hope it helped!  Cheers!

 

I apologise in advance if im being completely dumb about this. Also I have not read anything about SequantRe and the comments below are not about SequantRe but just ILS, or insurance-linked securities in general.

 

To me this seems very similar to banks making loans and then passing them off to Fannie/Freddie and keeping a fee. The more loans banks made the more money they made and they didn't keep the risk.

 

This seems similar but with insurance. Since the people writing the insurance have keep no risk, how do one make sure of the quality of the insurance that is written? The motivation for an ILS company seems to be to write as many contracts as possible to maximize profits.  ILS companies would have to write more contracts the lower insurance rates got. But if an insurance company is not getting the premiums to cover the risk it should be writing less insurance?

 

The way SequantRe is structured, is that it gets a percentage of the profits from any investment gain from the underlying collateralized capital.  That only happens two ways...good investments and good underwriting.  If you have poor underwriting, that can easily wipe out any investment gains.  Thus we are incentivized to make good underwriting decisions.  Cheers!

 

Been thinking about SequantRe the last couple of days since I've been trying to learn about the whole blockchain technology and smart contracts.  Still have the understanding of the technology of about a 1st grader so bear with me. 

 

My understanding is blockchain technology would be ideal for managing derivative contracts between two parties.  Since SequantRe is creating ILS, will it be trying to use smart contracts when a chuck of securities are split up and sold to investors?  My thinking, there would need to be some way to tie everything back together.

 

An example would be, insurance policy is written to cover tornado damage in Atlanta, Ga.  The ILS is created and split into different groups that are sold off to investors.  Two years later a tornado come through and wipes out Atlanta.  How would the different grouping (exposure to Atlanta security 1 25% security 2 75%) of the policy be matched back together?  If I am way off the mark just say so in how it actually works.

[CONeal]

6 month financials ending March 31st is out

 

http://thecse.com/en/listings/diversified-industries/premier-diversified-holdings-inc

 

Scroll down to CSE fillings on that page (it's the easiest way without trying to navigate Sedar)