PDH - Premier Diversified Holdings Inc.

[Partner24]

Hi Sanjeev, regarding the funding of the business operations and investments, you issued new shares from time to time. Now that the price of the shares have dropped significantly over the last few weeks, is there any change in the way that you plan to raise or use cash for PDH? Thank you.

[ourkid8]

We will continue to see significant dilution until one of the following is met:

 

1. Vancouver clinic is able to generate enough cash and absorb the bleeding from Sequant Re which looks to be at least a couple of years out

2. Sequant Re starts generating revenue which so far has been non existent

3.  Sanjeev is able to buy a profitable cash generating business  to absorb the losses from Sequant Re (I cannot see why any businesses would want to sell themselves to PDH in the current state)

4.  Sanjeev decides Sequant Re is a flop and shuts it down

 

I really hope Sanjeev is looking closely at option #4 and realizes he was taking on too much risk way too early.

 

Hi Sanjeev, regarding the funding of the business operations and investments, you issued new shares from time to time. Now that the price of the shares have dropped significantly over the last few weeks, is there any change in the way that you plan to raise or use cash for PDH? Thank you.

[tombgrt]

Don't bite off more than you can chew.

 

Feel bad for people that invested here based on a certain persona. Hey, been there, done that... This was always one big gamble imo.

 

[bizaro86]

October report indicates they are taking a minority stake in a immigration services business. While I'd prefer to see immediate cash flow generators, this is better than their other startups from a risk perspective.

 

Both the med tech and reinsurance businesses have the potential to be great businesses with two sided network effects giving rise to a large moat. Unfortunately, if a network business doesn't scale it is usually a zero, which is tough when you have overhead and limited investment funds.

 

A services business for wealthy immigrants to Vancouver has the potential to be high margin, with strong immediate cash flow.  That is what PDH needs right now, cash flow to cover overhead to buy time for the other investments to play out. Even if it doesn't ever scale that would be perfectly OK if it keeps the lights on.

[shalab]

PDH is now at 6 cents/share. Anyone buying at these levels?

 

October report indicates they are taking a minority stake in a immigration services business. While I'd prefer to see immediate cash flow generators, this is better than their other startups from a risk perspective.

 

Both the med tech and reinsurance businesses have the potential to be great businesses with two sided network effects giving rise to a large moat. Unfortunately, if a network business doesn't scale it is usually a zero, which is tough when you have overhead and limited investment funds.

 

A services business for wealthy immigrants to Vancouver has the potential to be high margin, with strong immediate cash flow.  That is what PDH needs right now, cash flow to cover overhead to buy time for the other investments to play out. Even if it doesn't ever scale that would be perfectly OK if it keeps the lights on.

[CassiusKing1]

PDH is now at 6 cents/share. Anyone buying at these levels?

 

October report indicates they are taking a minority stake in a immigration services business. While I'd prefer to see immediate cash flow generators, this is better than their other startups from a risk perspective.

 

Both the med tech and reinsurance businesses have the potential to be great businesses with two sided network effects giving rise to a large moat. Unfortunately, if a network business doesn't scale it is usually a zero, which is tough when you have overhead and limited investment funds.

 

A services business for wealthy immigrants to Vancouver has the potential to be high margin, with strong immediate cash flow.  That is what PDH needs right now, cash flow to cover overhead to buy time for the other investments to play out. Even if it doesn't ever scale that would be perfectly OK if it keeps the lights on.

I think you'll be able to buy at $0.06 for a while if not a little bit cheaper in the near term.

[Junto]

Parsad I wish you would take the emotion out of the responses a little. The facts remain the results are not very good and I understand it is a turnaround but the investment returns leave much to be desired.

 

Very little discussion on Sequant, what is the real story? $1,505,000 to $952,041 (USD) in 7 months?  Would be good to get some more detail because that is tough to stomach.

 

Net Losses continue to be excessive compared to revenues. 2015 YTD Revenues of $561,400 with a Net Loss of $993,481 vs 2014 Revenues of $332,727 and Net Loss of $558,220.

 

Just trying to be constructive here as the business fundamentals and investment performance to date have been a struggle.

 

Are you planning to come out with some more support for the actions and how the company intends to get to profitability? Thanks.

 

Junto,

 

The emotion is there because it is mind-numbing when people speculate on things without knowing what is happening underneath the hood.

 

Without discussing anything not already in filings, press releases, monthly filings on the CSE, etc, here is what has happened in the last 12 months...and over 90% of it in the last 9 months:

 

- The Burnaby Clinic was completely shut down and behind on all payables by 10 weeks, including employee salaries...that was all taken care of

- The company's rent was six months behind with the bailiff picking up the rent check...that was taken care of

- The Burnaby Clinic hired a full-time tech as we started again from scratch with a tattered reputation

- Completed the Asset Purchase Agreement for the Clinic

- We did a huge private placement at zero cost other than legal and filing fees

- Huge undertaking of properly documenting the company's operations, corporate governance policies, internal controls, missed regulatory filings, missed financial filings and tax filings

- Hired a new auditor

- Changed the company from a medical issuer to a holding company/investment issuer

- Replaced half the board of directors

- Head office hired a company receptionist/admin...we pay about half the salary, the other half is covered by our sub-lease Cystic Fibrosis Canada

- Notice how payables are down $700K in the last 9 months...part of that was roughly 7 significant settlements, including one for over $430K in the last quarter that was settled for 43 cents on the dollar; settled with the former CEO; settled with Siemens; dealt with HK tax summons

- Complete revamp of how the financials are presented to shareholders, including the MD&A and all disclosures

- Push to grow China business, including hiring a highly qualified General Manager and implementing the same controls and policies as head office

- We launched Sequant Re from scratch...literally zero

- We made a bid for control of Russell Breweries, including significant legal, regulatory and filing costs

 

These are just the major issues...doesn't include many of the more trivial minor issues that still have costs associated with them.

 

So let me ask you Junto, with all of that happening, how much do you think are one-time costs in legal, consulting, professional fees, regulatory filings costs, press release fees, Computershare, Broadridge fees, transitional accounting and audit fees, printing costs, settlements, etc?  Any idea?  Can you pinpoint that number?  Of course not.  Not without sitting at my desk or being a fly on the wall in my office.

 

In terms of Sequant Re, it is a complete start-up from scratch.  We are essentially building a reinsurer/ILS entity from a standing start.  And remember, Bermuda is not cheap!  You have to hire staff, pay them adequately, subsidize their housing, set up an office, equipment, software, legal (enormous), statutory and regulatory documents, filings, website, advertising, travel, meetings, etc...the list is endless.  We aren't building some half-assed $5M insurance business!  Ask yourself how long it would take any of Berkshire's or Fairfax's insurance businesses to have launched from scratch?  Sequant will run losses until gross premiums scale to break-even.

 

I don't know if you read Mohnish's latest letter on Dhandho, but Stonetrust had a $4.2M underwriting loss last year.  We are trying to build an insurance business from scratch that will do more in premiums than Stonetrust in less than five years for what Stonetrust lost in one year!  Stonetrust also is replacing their in-house actuary...showing how tough the insurance business is in terms of recruiting talent.  We have two of the best actuaries in the business already in-house in Guy Cloutier and David Lalonde!  These guys are working relentlessly to build this out and scale the business.

 

Like Berkshire, Fairfax, Markel, Leucadia or any other holding company type of structure, we have built-in monthly fixed costs at head office...salaries, rent, benefits, corporate costs, accounting, filings, press releases, listing costs, legal, etc.  This is fixed at a certain amount, and our operating business net revenues and investment income (gains, dividends, interest) have to cover those costs or preferably surpass them.  For a very small company, that is tough to do, but I've always had people count me out.  Even long-time friends and partners close to me had doubts about whether we would succeed or not...that was very disheartening and disappointing!   

 

Investors should be focused on two things:  Is our net operating revenue growing when one-time costs are removed?  Is book/value per share increasing over time?  As one-time costs dissipate and our operating businesses continue to grow, we expect that to happen.  Take a look at our growth in revenues at the Burnaby Clinic.  That business has about a 60% gross margin, but 28% net profit margin now at the levels it is running at!  It's not even running at 40% of capacity yet!  This was doing nothing last year and had a massive burden of payables.  It's reputation was a laughingstock!  Recently, we were the only clinic in Western Canada selected for an Alzheimer's drug trial.  We have about 70-80 different doctors referring to us now with patients from BC, Alberta and Vancouver Island.

 

I would encourage our shareholders to talk to our employees, directors, business operators, and even service providers and ask them where this company is today compared to last year.  And where they think it will be five years from now!  Personally, the best thing I could have done for myself and Corner Market Capital was to invest in Premier...even though it was never planned to pan out this way in terms of our vehicle.  I cannot explain how big an advantage captive capital is, and both our shareholders and Corner Market Capital partners will benefit enormously from that over time!  Cheers!

 

Two years later and the business has not turned a corner. 6 cents or lower, it is still overpriced in the marketplace. You all should be selling and waiting to see what happens here.

 

Dilution from equity raises to support the poor fundamentals will continue to pressure the business. Parsad should have taken my advice to shut down the legacy business and focus on new pursuits. The largest risk I see on the management strategy is a layering of start up investments on top of a negative cash flow legacy business. High risk on top of high risk is not a good focus.  Investment returns in stocks are not enough to make up for the poor underlying operating units.

 

This has played out on target with my expectations and I sincerely hope many of you avoided it or only invested what you could lose. This way the losses could be offset with the market surge during the same period.

[ourkid8]

Sanjeev, would you please provide your feedback?  Shareholders are getting absolutely crushed. 

[gurpaul88]

Didn't Corner market sell shares in Oct? I think it was ~4,000,000 according to Sedar

[Gregmal]

No position here, but I think some of the criticism of the business model that people had for something like BOMN would apply here as well. It's just challenging and something one must view as speculative. At least here you guys know Sanjeev is honest and doing his best. Not to mention he has the nuts to address most of you guys on a message board, typically behaviour viewed as taboo in the investment world. Lot's of fund managers are 1) anti social douchebags who have no problem taking(whether it be fees, assets, media attention, or in relation to a place like this, investment ideas) but rarely ever reciprocating. Mr. Parsad seems to be the antithesis of this. 2) no genuine interest in holding investors hands through an investment(again, something Sanjeev does for you guys), and 3) lack the nuts to face criticism on a consistent basis(Imagine Berkowitz owning a website and holding a regularly updated thread on SHLD?)

 

Maybe the project isn't panning out as planned. The investment results havent been good. But there is no reason to hold this investment in any different light or have any different set of expectations than you would with any other highly speculative, high risk high reward venture. Sometimes things just don't work out. At least here everybody had an idea what they were getting into and was provided complete transparency along the way. Much more than you typically get with an investment like this. That doesn't mean heads should roll or the guy running it needs to be vilified. At the end of the day we are all responsible for the investments we make(although admittedly sometimes complaining is necessary and/or fun. I just don't think here it is warranted).

[Parsad]

Didn't Corner market sell shares in Oct? I think it was ~4,000,000 according to Sedar

 

Cannot comment on the company...investors will have to be patient and hold, or sell if they so desire.  We're in this for the long haul...not 2, 5 or 10 years.

 

Neither Alnesh, myself, nor Andrew Cooke have sold a single share.  The sales you see are related to any redemptions in either of our funds...redeeming partners received their pro-rata share in PDH, so that we do not jeopardize our fund liquidity at all.  Corner Market Capital has to file whenever this happens.  Cheers!

[CONeal]

Guess I’ll be the asshole that goes against the grain here.

 

Personally I don’t care if he comes in and addresses the stock price.  I prefer he doesn’t bc then we will expect him to address every market move.

 

Maybe I am viewing things incorrectly but everything has been laid out.  Including the expectations of when we might see SequantRe generate fees.  All this is in the MDA’s and this year’s letter.  It is a waste of time to complain about SequantRe not generating revenue when there was not an expectation for them to be generating fees.  Management has clearly stated when they think SequantRe will generate fees from that operation.  Once a person goes through the MDA and matches it to a timeline it gives an indication when cash flow might improve.

 

Does it suck that the stock price is in the gutter?  Hell yes!! And like most people, I am just weathering the storm.  Keep in mind there are approx. 1.5 million options that in March/May (can’t remember right off the top of my head) with a strike price of .05 cents.  That is free money to whoever is holding them.  Also large holders from the old management team have been unloading their shares in the past.  This is probably also helping contributing to the fall in stock price since supply outstrips demand.

 

Could he do a better job?  Of course, no one is perfect but he could also be doing a hell of a lot worse.  Most of the investments are startups and needs a startup mentality/expectations.  Despite the fall in stock price, it has not changed my view or thesis of the company. 

 

Of course as soon as I typed this all out Prasad would have a response.  lol

 

[bookie71]

Does it suck that the stock price is in the gutter?

Only if you are selling, if you are in for the long run and your due diligence says the company is doing what you want it to, then you use the low prices to increase your position.

jmho

[gurpaul88]

Another private placement at .075

 

"The net proceeds of the Offering will be used to fund the acquisition of an interest in MyCare MedTech Inc. (an Alberta telemedicine company), and for general working capital. The Issuer may, in its discretion, determine to use the proceeds for acquisition of other entities or assets, including an interest in Sequant Reinsurance Holdings Ltd. (a Bermuda-based reinsurance company)"

[PLynchJr]

Yikes!  PRDGF down to .0421 now.  FYI...it appears the $50 fee to buy with Fidelity is now gone.

[rkbabang]

FYI...it appears the $50 fee to buy with Fidelity is now gone.

 

I noticed that too.  I had a limit order in for a while to buy at $0.055 and it filled recently with no $50 fee.

 

[Jurgis]

Yikes!  PRDGF down to .0421 now.  FYI...it appears the $50 fee to buy with Fidelity is now gone.

 

The fee has been inconsistent before. Sometimes it was on, sometimes not.

[gurpaul88]

could probably expect continued dilution.

[ourkid8]

Thank you for selecting #4!  :-)

 

https://finance.yahoo.com/news/premier-diversified-holdings-inc-provides-221500013.html

 

We will continue to see significant dilution until one of the following is met:

 

1. Vancouver clinic is able to generate enough cash and absorb the bleeding from Sequant Re which looks to be at least a couple of years out

2. Sequant Re starts generating revenue which so far has been non existent

3.  Sanjeev is able to buy a profitable cash generating business  to absorb the losses from Sequant Re (I cannot see why any businesses would want to sell themselves to PDH in the current state)

4.  Sanjeev decides Sequant Re is a flop and shuts it down

 

I really hope Sanjeev is looking closely at option #4 and realizes he was taking on too much risk way too early.

 

Hi Sanjeev, regarding the funding of the business operations and investments, you issued new shares from time to time. Now that the price of the shares have dropped significantly over the last few weeks, is there any change in the way that you plan to raise or use cash for PDH? Thank you.

[Parsad]

Hi,

 

It was not an easy decision, but we spent the last three months in due diligence with an offer for $2M in the holding company and $50M in the ILS portfolio.  We were so close...but right before Christmas, this very well known firm decided to pull out.  So at last Thursday's Sequant board meeting, it was decided to put it into liquidation after exhausting all of our contacts.  We will have more details in the annual letter at the end of the month.

 

It's painful to take the loss, but the dilution decreases dramatically, current and new resources will go into actual, growing cash flowing businesses, and losses will decrease by 60% plus after this quarter.  We gave it three full years...a year longer than we originally planned...even if we put more money into it, the stigma of a lack of commitment into the ILS portfolio would only create more questions from institutions.  Ironically, the model portfolios performed fantastic the last three years, returning anywhere from 7-12% annually, even during such a busy hurricane and catastrophe season.

 

We will continue to focus on the clinic business, goevisit.com and real estate which are all doing wonderfully, and we'll work hard to recoup these losses over the next few years!  Cheers!

[Ballinvarosig Investors]

As a result of the liquidation of SRHL, the Company will write down the carrying value of the Investment in Associate in the amount of approximately $2,500,000 to $nil as of September 30, 2017.

Yikes, this looks awful. Shareholder equity as of the most recent interim was $5.9M. If $2.5M gets knocked off because of the Sequant impairment, we can maybe expect another $0.5M of losses if the first half of the year was anything to go by. Shareholder equity could be as low as $2.9M as of year-end.

 

I really don't know how PDH can remain viable as a public company with such little capital. The only consolation is I would bet Parsad is hurting more than any of the shareholders right now.

[ourkid8]

Now the conversation should shift to cost cuts at the holding company e.g. Salaries etc. until we can truly become a viable public traded company.  Sanjeev and team should take a significant pay cut until the clinic's cash can offset the OH costs at the HoldCo. 

 

As a result of the liquidation of SRHL, the Company will write down the carrying value of the Investment in Associate in the amount of approximately $2,500,000 to $nil as of September 30, 2017.

Yikes, this looks awful. Shareholder equity as of the most recent interim was $5.9M. If $2.5M gets knocked off because of the Sequant impairment, we can maybe expect another $0.5M of losses if the first half of the year was anything to go by. Shareholder equity could be as low as $2.9M as of year-end.

 

I really don't know how PDH can remain viable as a public company with such little capital. The only consolation is I would bet Parsad is hurting more than any of the shareholders right now.

[Partner24]

OMG. It must have been terrible to have a big project like that ends up with a liquidation.

 

But you stopped the bleeding. It was a 10 feet pole, two birds in the bush, you name it...

 

I don't care for the accounting loss. Profit is vanity, cash flow is reality. I'm happy to see that you'll now put all the focus on the other projects.  The day that you generate positive free cash flows...is the day that we are independant from outside investments and safe.

[benchmark]

Now the conversation should shift to cost cuts at the holding company e.g. Salaries etc. until we can truly become a viable public traded company.  Sanjeev and team should take a significant pay cut until the clinic's cash can offset the OH costs at the HoldCo. 

 

As a result of the liquidation of SRHL, the Company will write down the carrying value of the Investment in Associate in the amount of approximately $2,500,000 to $nil as of September 30, 2017.

Yikes, this looks awful. Shareholder equity as of the most recent interim was $5.9M. If $2.5M gets knocked off because of the Sequant impairment, we can maybe expect another $0.5M of losses if the first half of the year was anything to go by. Shareholder equity could be as low as $2.9M as of year-end.

 

I really don't know how PDH can remain viable as a public company with such little capital. The only consolation is I would bet Parsad is hurting more than any of the shareholders right now.

 

This really sucks -- a typical 'sunk cost' that went too long. Have to learn to walk and be independent before shooting for the stars.

[RichardGibbons]

This really sucks -- a typical 'sunk cost' that went too long. Have to learn to walk and be independent before shooting for the stars.

 

To me, it doesn't sound like a sunk cost that went too long. From what Sanjeev said, it sounds like there was a reasonable chance of success right up until a few weeks ago. The way I see things--that is, assuming none of the people involved is clairvoyant--it sounds like it was shut down at exactly the right time.