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Paragon Care Ltd ("PGC") - Healthcare upside!!
While a very large number of small-cap resource stocks have experienced multi-bagger returns over the last few months, there are still some very nice opportunities among small-cap industrials.
i.e. PGC- market cap: $4.5m
Successfully recapitalised and restrucured earlier this year.
PGC have accumulated over the last year a portfolio of PROFITABLE businesses in the fast growing aged care/ health sector.
- a specialist aged care Financial Planning Consultancy business
- a specialist aged care employement plcement business
- a specialist aged care OHS consultancy business
- Axis health- a leading Australian supplier of Durable Medical Equipment http://www.axishealth.com.au/about.php
Expected FY10 turnover of $10m+
Per the annual report last month "As a result of the successful transformation and repositioning, the Company is expected to deliver in 2010, an operating profit and positive cash flow for the first time in the Company’s history."
Industry experienced and reputable directors now own 40% of PGC.
Further aged care/ health sector acquistions being investigated.
PGC currently 0.021
PGCOA currently 0.007
Share prices follow earnings....buy EPS growth!!
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Paragon have gone live with their new website http://www.paragoncare.com.au/
There is now a (commissioned) research report on PCG that provides a nice summary of the company http://www.paragoncare.com.au/file/258
"Paragon Care has the potential to deliver high returns to investors over the next few years, as it pursues its acquisition-based strategy to build scale and a national footprint. This will be underpinned by recently acquired profitable core businesses which will support an earnings based valuation for the first time in its history.
The company is positioned in an attractive high growth market, with considerable opportunities, which we expect to attract increasing investor interest over the next few years."
Market cap is approx $4m.
Nobody knows about this company.
Only people currently buying heads are the directors.
I was lucky enough to get another 1,000,000 PGCOA this morning.
Share prices follow earnings....buy EPS growth!!
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Originally Posted by steve fleming
Paragon have gone live with their new website http://www.paragoncare.com.au/
There is now a (commissioned) research report on PCG that provides a nice summary of the company http://www.paragoncare.com.au/file/258
" Paragon Care has the potential to deliver high returns to investors over the next few years, as it pursues its acquisition-based strategy to build scale and a national footprint. This will be underpinned by recently acquired profitable core businesses which will support an earnings based valuation for the first time in its history.
The company is positioned in an attractive high growth market, with considerable opportunities, which we expect to attract increasing investor interest over the next few years."
Market cap is approx $4m.
Nobody knows about this company.
Only people currently buying heads are the directors.
I was lucky enough to get another 1,000,000 PGCOA this morning.
Hi Steve, have you got an recommendation on where to kick off my research into PGC. THe options look very tasting with the long expiry. What is there exercise price?
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Ok dont' worry about the option question. Just seen that it is 2c. Interesting company from my research so far.
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Steve Fleming, & other Investors please take note that the age care industry will collapse when the aged that need care wake up to the fact. That if they shoot a politician plead guilty and end up in jail they will get better care than most can afford for free. I have a brother in aged care state subsidized by a large amount. But would have far better living conditions in Jail.
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Update today:
- Operating cash flow positive for the first time;
- each business unit performing ahead of budget, operating profitably and are generating positive cash flow;
- Each business units is capable of delivering sustainable double digit growth from better marketing, new products and services and expansion into new markets;
- increasing spending on the hospital sector, and in particular a high level of capital works programs, which drive equipment spending.
Share prices follow earnings....buy EPS growth!!
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2.5 cents was taken out on the close today.
This is kinda significant as PGC has closed at 2.5c SEVEN times over the last 5 months, but has not once broken through.
Will next week be the break out, or will it fail again?
Share prices follow earnings....buy EPS growth!!
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Hi Steve,
Looks interesting, though I'm wary of the "bolt-on acquisition" growth strategy after AMA!
My calcs suggest the market cap is already twice the value of their total payment for acquisitions to date less net debt. Though it's quite possible they could add that kind of value to a small business if they are canny operators.
Maybe worth up to 5cps over next 12 months if all goes well though?
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Originally Posted by Lizard
Hi Steve,
Looks interesting, though I'm wary of the "bolt-on acquisition" growth strategy after AMA!
My calcs suggest the market cap is already twice the value of their total payment for acquisitions to date less net debt. Though it's quite possible they could add that kind of value to a small business if they are canny operators.
Maybe worth up to 5cps over next 12 months if all goes well though?
Hi Liz,
Good points - the AMA disaster should not be forgotten.
(With hindsight!!) it is apparent that AMA (and also BLU & CQU) expanded too quickly, with too much debt, without paying appropriate respect to integration and controls. But just as importantly, the businesses they acquired were generally too disparate, such that sufficient synergies betweeen businesses could not be acheived - which is where you really create value in acquisitions.
PGC to date has expanded slowly/conservatively with a real focus (at least with Lifetime Planning & Tender Living) on synergies.
In relation to their acquisition costs:
Axis Health: $3.2m
Lifetime Planning: $600k
Tender Living: $270k
Ascentor: $300k
TOTAL: $4.4m
Enterprise Value = m/c ($5.4m) + net debt as at Sept (=$1.8m - $1.2m cash)
So EV =$6m
If they can do EBIT for the 6 months of say $500k, + can demonstrate some nice growth, a 5c target is not demanding.
Share prices follow earnings....buy EPS growth!!
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Thanks Steve. Slight differences in our calcs - I missed Ascentor in mine, but figured their total debt now $2.3m and cash $1.1m. Might have misread their borrowings (how did they manage to borrow $1.85m last qtr anyway? A 3 yr arrangement secured over the assets of Axis Health seems generous given level of goodwill, so perhaps a good sign as to the underlying strength there?)
On the positive side re the EV:Book, a high ratio is an advantage in purchasing further businesses, since it will make it less dilutive. So as you say, the trick is in finding a balance between growth by acquisition and getting a massive attack of indigestion.
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