PDH - Premier Diversified Holdings Inc.

[Spekulatius]

Don‘t forget 844k in corporate cost annually.  Cutting them will cost money first. If you put a 2–3x  multiple on them, in the case of a liquidation or restructuring , PDH‘s NPV will be quite a bit closer to zero.

[ourkid8]

You took my statement out of context.  I was extremely disappointed and upset over SequantRe.  I am okay with Mycare as it is a $1.2M investment, related to PDC and we are not going to further fund its operations!!!

 

I am fine with MyCare because Sanjeev seems to have learned his lesson with SequantRe, it is relatively small and related to PDC.  Sanjeev, would you please provide growth details on MyCare along with those growth targets? 

 

If SequantRe was small... how you would describe their other investments?

 

Meaningless?

[shalab]

850K in corporate cost for a 5MM market cap company? Might as well take the concern private but that is unlikely. We can look for more dilution moving forward. A lot of people on this board that invested in this will probably lose money.

 

Don‘t forget 844k in corporate cost annually.  Cutting them will cost money first. If you put a 2–3x  multiple on them, in the case of a liquidation or restructuring , PDH‘s NPV will be quite a bit closer to zero.

[Spekulatius]

850K in corporate cost for a 5MM market cap company? Might as well take the concern private but that is unlikely. We can look for more dilution moving forward. A lot of people on this board that invested in this will probably lose money.

 

Don‘t forget 844k in corporate cost annually.  Cutting them will cost money first. If you put a 2–3x  multiple on them, in the case of a liquidation or restructuring , PDH‘s NPV will be quite a bit closer to zero.

 

I mentioned this before, but PDH, even before the recent writeoff has too small of am; asset base to be viable. It would need to be 5x or even better 10x larger to justify the current level of expenses and overhead. We will see if  PDH is able time shrink the current overhead now that some of the business are gone. This stock is either a zero or they need to raise a lot of capital to increase the asset base,  because it won’t happen from retained earnings.

[shalab]

I don't see the quota for this anymore in google finance. Yahoo was not showing it before. Looks like 4 cents/share CAD and likely go down further.

 

850K in corporate cost for a 5MM market cap company? Might as well take the concern private but that is unlikely. We can look for more dilution moving forward. A lot of people on this board that invested in this will probably lose money.

 

Don‘t forget 844k in corporate cost annually.  Cutting them will cost money first. If you put a 2–3x  multiple on them, in the case of a liquidation or restructuring , PDH‘s NPV will be quite a bit closer to zero.

 

I mentioned this before, but PDH, even before the recent writeoff has too small of am; asset base to be viable. It would need to be 5x or even better 10x larger to justify the current level of expenses and overhead. We will see if  PDH is able time shrink the current overhead now that some of the business are gone. This stock is either a zero or they need to raise a lot of capital to increase the asset base,  because it won’t happen from retained earnings.

[StevieV]

Everything I have read about Parsad has been great.  He seems like an upstanding guy who will care about his investors.  Great investor as well.

I am also glad he created this board.

 

That being said, I am not sure I understand PDH.  It seems to me as though Parsad's expertise is in investing in public securities.  PDH has mostly been focused on operating businesses.  As has been said above, not only operating businesses, but early stage companies or even brand new (Sequant).

 

They've had a couple of missteps so far.  First with the Chinese operations and now with Sequant.  I don't think there is anything unusual about that.  Going into China, starting new ventures - those are going to be things riddled with missteps.  It just puts a very small company in a tough financial position.

 

Maybe I am looking through biased glasses, but I still tend to think Parsad will make a go of it eventually.  And, I would like to own shares of PDH someday.  However, in order to make a reasoned investment case, I will need to see more.  Hoping the next few years go well for PDH and I can become a shareholder.

 

Best of luck to all of those involved in the company.

 

[shalab]

I also hold Parsad in high regard. He owns multiple businesses and is a self made multi millionaire.

 

For PDH to survive, they have to do a reverse split to raise the share prices. They can then do a secondary offering at the same time.  They would need to cut the salaries of "overhead" and bring it down. This will be a painful but necessary step. I don't see how 25% of the market cap in overhead can be sustained.

 

They also need to change the business model to invest in public securities as opposed to speculative ventures.

 

cheers!

shalab

 

Everything I have read about Parsad has been great.  He seems like an upstanding guy who will care about his investors.  Great investor as well.

I am also glad he created this board.

 

That being said, I am not sure I understand PDH.  It seems to me as though Parsad's expertise is in investing in public securities.  PDH has mostly been focused on operating businesses.  As has been said above, not only operating businesses, but early stage companies or even brand new (Sequant).

 

They've had a couple of missteps so far.  First with the Chinese operations and now with Sequant.  I don't think there is anything unusual about that.  Going into China, starting new ventures - those are going to be things riddled with missteps.  It just puts a very small company in a tough financial position.

 

Maybe I am looking through biased glasses, but I still tend to think Parsad will make a go of it eventually.  And, I would like to own shares of PDH someday.  However, in order to make a reasoned investment case, I will need to see more.  Hoping the next few years go well for PDH and I can become a shareholder.

 

Best of luck to all of those involved in the company.

[ourkid8]

Agreed and this needs to start with Sanjeev and his management team taking a substantial pay cut.  I would also like him to immediately stop any initiatives to increase OH such as listing on the TSXV as we are in survival mode.   

 

I also hold Parsad in high regard. He owns multiple businesses and is a self made multi millionaire.

 

For PDH to survive, they have to do a reverse split to raise the share prices. They can then do a secondary offering at the same time.  They would need to cut the salaries of "overhead" and bring it down. This will be a painful but necessary step. I don't see how 25% of the market cap in overhead can be sustained.

 

They also need to change the business model to invest in public securities as opposed to speculative ventures.

 

cheers!

shalab

 

Everything I have read about Parsad has been great.  He seems like an upstanding guy who will care about his investors.  Great investor as well.

I am also glad he created this board.

 

That being said, I am not sure I understand PDH.  It seems to me as though Parsad's expertise is in investing in public securities.  PDH has mostly been focused on operating businesses.  As has been said above, not only operating businesses, but early stage companies or even brand new (Sequant).

 

They've had a couple of missteps so far.  First with the Chinese operations and now with Sequant.  I don't think there is anything unusual about that.  Going into China, starting new ventures - those are going to be things riddled with missteps.  It just puts a very small company in a tough financial position.

 

Maybe I am looking through biased glasses, but I still tend to think Parsad will make a go of it eventually.  And, I would like to own shares of PDH someday.  However, in order to make a reasoned investment case, I will need to see more.  Hoping the next few years go well for PDH and I can become a shareholder.

 

Best of luck to all of those involved in the company.

[bizaro86]

The Chinese stuff was a legacy investment from prior to current management taking over. The fact it was a big write off isn't their fault, imo.

 

I would love to see them buy an operating business, but something more like Russell Breweries. A cash flowing business with a simple model. Anything to sop up the overhead and deliver cash for reinvestment.

[ourkid8]

Please see an update to the sum of parts analysis based on the companies corporate update.  We are looking at an  approx. value of $7.3M.  There is however a $850k burn rate at the Holdco a year which needs to be addressed ASAP.  At the current market cap of ~$6.5M, it is undervalued based on a sum of parts however the burn rate will start to consume the cash unfortunately. 

 

-Cash and equivalent: $1,885,460

-MyCare investment: $2,400,000 (based on outside funding)

-Russell: I accounted for the 2 distributions + sale of the shell company in Cash

-Recovery of assets from China: $180,000 (Which I have accounted for in cash based on corporate update)

-Bentley: $500,000 (which I have accounted for in cash based on corporate update)

-Arcola: $620,000 (Roughly ~31% increase in value based on the comps Sanjeev provided)

-Greenway Milworks inc and North America Residency Services inc: $0 (shutting it down – thank god)

-PDC – Rough estimate of 2x sales so $2,400,000

 

"Outlook

 

After the liquidation of Sequant Re and the Chinese Operations, management believes that the outlook for Premier is clearer and the Company structure is simpler.  Legacy issues have been removed and financial commitments to these liquidated operations no longer exist.

 

Premier has no debt, and in management's view, has adequate working capital. It is focused on its current operating businesses, while seeking out established, positive cash-flowing, small businesses as acquisition targets.  All resources will be directed to this endeavor."

[Foreign Tuffett]

Please see an update to the sum of parts analysis based on the companies corporate update.  We are looking at an  approx. value of $7.3M.  There is however a $850k burn rate at the Holdco a year which needs to be addressed ASAP.  At the current market cap of ~$6.5M, it is undervalued based on a sum of parts however the burn rate will start to consume the cash unfortunately. 

 

-Cash and equivalent: $1,885,460

-MyCare investment: $2,400,000 (based on outside funding)

-Russell: I accounted for the 2 distributions + sale of the shell company in Cash

-Recovery of assets from China: $180,000 (Which I have accounted for in cash based on corporate update)

-Bentley: $500,000 (which I have accounted for in cash based on corporate update)

-Arcola: $620,000 (Roughly ~31% increase in value based on the comps Sanjeev provided)

-Greenway Milworks inc and North America Residency Services inc: $0 (shutting it down – thank god)

-PDC – Rough estimate of 2x sales so $2,400,000

 

"Outlook

 

After the liquidation of Sequant Re and the Chinese Operations, management believes that the outlook for Premier is clearer and the Company structure is simpler.  Legacy issues have been removed and financial commitments to these liquidated operations no longer exist.

 

Premier has no debt, and in management's view, has adequate working capital. It is focused on its current operating businesses, while seeking out established, positive cash-flowing, small businesses as acquisition targets.  All resources will be directed to this endeavor."

 

Don't you need to account for the NPV of their annual corporate overhead before you declare the company "undervalued?" Even if they can get their corp costs down to $500K per year, at a 8X multiple that's a $4M "liability" that would need to be taken into account.

[ourkid8]

Sorry, I am relatively new to this.  Would you please help me understand why you would put an 8x multiple on the OH to be taken into account as NPV? 

 

Don't you need to account for the NPV of their annual corporate overhead before you declare the company "undervalued?" Even if they can get their corp costs down to $500K per year, at a 8X multiple that's a $4M "liability" that would need to be taken into account.

[Foreign Tuffett]

Sorry, I am relatively new to this.  Would you please help me understand why you would put an 8x multiple on the OH to be taken into account as NPV? 

 

Don't you need to account for the NPV of their annual corporate overhead before you declare the company "undervalued?" Even if they can get their corp costs down to $500K per year, at a 8X multiple that's a $4M "liability" that would need to be taken into account.

 

Corporate costs are a recurring expense. The idea is to capture the net present value of future corporate overhead costs. What multiple (8X, 10X, etc) to use is a matter of opinion.

[ourkid8]

Ah... So at the current OH with an 8x multiple, the value of the company is essentially $0.  Makes sense and I appreciate the help!

 

Sorry, I am relatively new to this.  Would you please help me understand why you would put an 8x multiple on the OH to be taken into account as NPV? 

 

Don't you need to account for the NPV of their annual corporate overhead before you declare the company "undervalued?" Even if they can get their corp costs down to $500K per year, at a 8X multiple that's a $4M "liability" that would need to be taken into account.

 

Corporate costs are a recurring expense. The idea is to capture the net present value of future corporate overhead costs. What multiple (8X, 10X, etc) to use is a matter of opinion.

[wabuffo]

Sanjeev's letter to shareholders:

 

In 2017 we began efforts to sell the China operations. These discussions continue and are inherently long in nature, so we have decided to take the conservative route and write-down the China operations at this time. Any recovery of assets will be treated as a gain in subsequent quarters

....

Recovery of assets from China: $180,000 (Which I have accounted for in cash based on corporate update)

.

So this appears settled - there is no recovery from the Chinese MRI equipment assets. 

 

http://thecse.com/sites/default/files/PDH_-_CSE_Form_7_-_Monthly_Report_January_2018.pdf

 

"The Issuer also reached an agreement with the former general manager of its Chinese Operations, Yang Gang, to complete the shut down of these operations. Pursuant to that agreement, Premier will transfer Premier Diagnostic (Hong Kong) Inc. ("PDHK") and Premier Diagnostic (China) Corporation ("PDCC") to Mr. Gang and will retain Premier Investment (Hong Kong) Limited and Premier Investment Shanghai Ltd. (PISH).  Mr. Gang will assume PDHK and PDCC and their corresponding assets and liabilities, including the MRI equipment at the Bejing medical imaging clinic. The purchase price will be approximately $180,000, subject to certain adjustments, and will be offset by certain payables owing by the Issuer to Mr.  Gang. The Issuer is consulting with local counsel in China regarding timing of closing these transactions."

 

wabuffo

[OracleofCarolina]

corporate update released today

 

http://markets.businessinsider.com/news/stocks/Corporate-Update-From-Premier-Diversified-Holdings-Inc-1015076937

"Premier has no debt, and in management's view, has adequate working capital. "

 

[vinod1]

I mentioned this before, but PDH, even before the recent writeoff has too small of am; asset base to be viable. It would need to be 5x or even better 10x larger to justify the current level of expenses and overhead. We will see if  PDH is able time shrink the current overhead now that some of the business are gone. This stock is either a zero or they need to raise a lot of capital to increase the asset base,  because it won’t happen from retained earnings.

 

To me the above is really the core issue. Assets are currently about $3.2 million. Let us say optimistically, the true asset value is $6 million as some assets might have been conservatively written off or because they have higher market values. Assume, in three years assets would go up to $25 million.

 

Even in such a scenario

 

1. Corporate expenses of 4% of assets (say corporate expenses grow to $1 million of expenses from current $0.84 million) would be an extremely high hurdle to overcome to produce even market rates of return.

 

2. The only way to grow to such an asset base is via stock offering, since existing operations are not likely to generate earnings sufficient to cover corporate expenses. A certain amount of debt would help but it is unlikely to be available at least at attractive rates.

 

3. What kind of private market opportunities would be available where paying market rates would generate above average returns?

 

    a) Is the model going to to be private equity where they use debt and operational improvements? Not sure this plays into PDH strengths.

 

    b) Is it going to be Berkshire model of buying up good businesses at attractive prices? Berkshire is using float to juice up the returns. PDH does not have any such source of low cost funds.

 

    c) Is it going be venture capital style investments?

 

The company has been dealt a very tough hand and I have nothing but the highest admiration for Parsad and hope he overcomes these challenges.

 

This seems to me a mission impossible type situation and want to understand how company investors think they can make money in this.

 

Thanks

 

Vinod

 

 

[Spekulatius]

This seems to me a mission impossible type situation and want to understand how company investors think they can make money in this. 

 

That is my opinion too and that is why I never owned the stock after looking at the numbers.

[Partner24]

It is focused on its current operating businesses, while seeking out established, positive cash-flowing, small businesses as acquisition targets.  All resources will be directed to this endeavor.

 

Good.

[Jurgis]

There is a hedge fund run by Sanjeev which has a huge stake in PDH. (per corner capital letters in their site) Not sure what happens to that if PDH goes to zero.

 

This seems to me a mission impossible type situation and want to understand how company investors think they can make money in this. 

 

That is my opinion too and that is why I never owned the stock after looking at the numbers.

 

The hedge fund is doing better than PDH. Yes, PDH stake was high, but it was less than 30% of fund even before the Sequant drop. And unlike PDH, the fund had some large gains last year (OSTK?) offsetting PDH loss. So it's painful at fund, but not as painful as at PDH proper.

[bizaro86]

I do wish PDH and Co all the best, but agree that this is a tough situation. They probably need to do two things:reduce corporate overhead, and get some a cash flow business into the fold.

 

I know there are minimum costs required to be a public company, but don't really think a hot breakfast at the Fairmont for the shareholder meeting meets that criteria. If they could cut costs and buy a good quality small business sufficient to end the cash burn, that would give them time for the RE and med tech investments to play out.

[benchmark]

I do wish PDH and Co all the best, but agree that this is a tough situation. They probably need to do two things:reduce corporate overhead, and get some a cash flow business into the fold.

 

I know there are minimum costs required to be a public company, but don't really think a hot breakfast at the Fairmont for the shareholder meeting meets that criteria. If they could cut costs and buy a good quality small business sufficient to end the cash burn, that would give them time for the RE and med tech investments to play out.

 

Yes, i'm perfectly fine to not have breakfast and meet at holiday inn express conf. room :)

[wabuffo]

the Hedge fund owned 49 million shares of PDH last year at a cost of 4.5 million.(per the letter at their website) At current market prices, it is worth around 1.5 million. The stock of PDH has dropped this year by a third...

 

During 2017 (after that letter), the Hedge fund also purchased a further 14.8m PDH common shares for $1.52m CAD (~10.25 CAD cents per share) during 2017 (per SEDI). 

 

wabuffo

[Parsad]

So overall, 6 million put in to PDH and the current value is 2.1 million. It is huge bet for a 11.5 million (at the end of 2016) Hedge Fund.

 

the Hedge fund owned 49 million shares of PDH last year at a cost of 4.5 million.(per the letter at their website) At current market prices, it is worth around 1.5 million. The stock of PDH has dropped this year by a third...

 

During 2017 (after that letter), the Hedge fund also purchased a further 14.8m PDH common shares for $1.52m CAD (~10.25 CAD cents per share) during 2017 (per SEDI). 

 

wabuffo

 

The fund was down 1.17% for the entire 2017 year.  PDH made up less than 20% of the fund at year-end.  Of the remaining 80%+, 40% was cash before the recent downturn in stocks.

 

Make of it what you will.  Cheers!

[tradevestor]

Premier Diversified Holdings Announces Normal Course Issuer Bid

 

https://globenewswire.com/news-release/2018/02/15/1348460/0/en/Premier-Diversified-Holdings-Announces-Normal-Course-Issuer-Bid.html