Investment Q&A

Q: In Donville's most recent ROE reporter, he notes that he remains committed to Concordia. He says this:

"...at current valuations, I think the company is
worth a lot more than $50 a share. On our numbers, CXR trades on 4.8x 2016 Cash Earnings and 1.1x BVPS, while earning a 24% ROE."

Are these valuations in line with 5i's research, including the AmCo (Amphidarm) deal?

Q: What is your assessment of the update released by CXR this morning of the AMco financing and Capital Structure post AMco Acquistion? Do you think the share price will recover with the closing of this deal Oct 21st? Do you see CXR being impacted by the events happening with Valeant in US? Thanks

Q: Concordia revenues are divided into 3 categories: Legacy Pharma, Orphan Drugs, Special HC Distribution. Could you explain what products make up each category? Legacy Pharma is far and away the biggest in $ volume.

Q: Hi 5i,

How do you feel about CRH at current levels? I like the company as it generates real FCF (1-2M per month), but I am concerned that their could be a structural shift outside of healthcare as companies continue to blow up (e.g. PHM, CXR, VRX, NHC).

Would you recommend CRH as a pick in the junior healthcare space? Do you think it will play catch up and drop down to its peers performance? Seems to be holding here at the 4 dollar level.

Thanks in advance.

Q: Had my eye on CXR for a while and thought I was cute by buying when they announced the placement pricing (at around $84 CAD) and we all know what has happened since. I caught a bit of your response yesterday to a caller on BNN regarding averaging down. My original purchase was a third to half position and makes up approx 1% of my portfolio. Thinking of adding to CXR here and bring my weighting up to 2% and see what happens. I may have also read that one reason for the share price decline was the possibility of having to do another share issue to pay down some debt? Is that a high probability? If so should I hold off buying the rest of my position?

Q: For your readers:

https://www.bloomburton.com/research/CXRX20151012.pdf

Research report dated Oct. 12 from Bloom Burton (investment bank specializing in Healthcare in the US) regarding CXR. Please note that valuation is in USD in the report. A $78USD target price would imply ~$100CAD.

It appears there is a massive disconnect between CXR's current share price and its earning potential. The selling is become almost ridiculous at this point. Thoughts?

Q: Hello,

I own NHC and am down 50%. I was planning to hold for the long term as fluctuations are common in small caps, however, I just read that two US law firms are now investigating them for violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.Can you please explain what this violation is? And what does it mean when a law firm gets involved? Does it mean there is a problem or the law firm is just looking to make some money?

Sadly this is my largest small cap holding, I bought way too much in it, about 5% of my total portfolio. Should I sell now or hold?

Best,

Carla

Q: Any outlook on Shire?

Q: In my Scotiabank brokerage account the news section tells me some firm in the US "Rosen" I believe wants to sue someone for causing the short selling on Nobilis and the losses by ordinary shareholders. They want me to sign up and they will be working on a contingency fee. What do you think about that?

Thanks,
Charlie

Q: You may have read an article posted on Seekingalpha regarding Nobilis. It is basically an all out attack on the co. (in my opinion). Is this an orchestrated short attack, or is there merit to some of the alleged issues? The author has stated they are short NHC so there is that. Earnings are due next month I believe.

Q: what happened to nobilis today

Q: Peter & Team, NHC is down 25% and was twice circuit breaker halted today. Would you care to comment on a Seeking Alpha piece attached? I can find no other news.

http://seekingalpha.com/article/3561556-nobilis-about-to-fall-from-nobility-part-i-65-percent-downside?app=1&auth_param=cnfd0:1b1fjrl:a319bf57fbddf7c8bc89b0fac7269511

Thank you.

Q: Nobilis is the latest healthcare stock to take a swoon. An article on Seeking Alpha is probably to blame:

http://seekingalpha.com/article/3561556-nobilis-about-to-fall-from-nobility-part-i-65-percent-downside

Would you continue to hold?
Thanks.

Q: Hello Peter,
Regards your response to a question today, swould the increase in credit spreads on its debt affect its ability to raise the $950 million, or make the terms for the debt unfavorable for the company thereby impacting the bottomline for the next 6to 8 quarters? Has the risk increased and the probability of a bounce reduced thereby making the current price appropriate rather than attractive?
Regards
Rajiv

Q: Hi Peter, I have to confess that I became too greedy today and bought 5% of my portfolio at 45.20. In retrospect now I am thinking I took probably too much risk. I started buying CXR at CAD 86 and then bought some at CAD 65 and again some at CAD 50 and today CAD 45.20. Now it is 15% of my taxable account portfolio. My average cost is now at around CAD 55. Should I see some position?

I read TD Securities report and they have a Price Target at CAD $105. I read RBC report too and they have USD $86 target price(in their worst model it is USD $30). Also read Jason Donneville letter. Anyways reading at the reports and looking at your responses since 2014 for this company it seems to me it is significantly undervalued. As say 4.6X 2017 earnings(that is a PE a Bank deserves during a financial meltdown). So I am not sure what I am missing here. I know they have high debt load, but looking at their current debt to equity ratio(I got it from TD, can you please confirm from Bloomberg? Also I believe this is pre-amdipharm number), it is lower than Valeant. Anyways, considering healthcare earnings estimates are usually accurate(i meant not in vagary of economic downturn), what is the major problem here(that retail investor like me don't know)? Can you please jot down the risks? Also is there any possibility that they could not acquire amdipharm? Can you tell me from Bloomberg if any institutional selling recently? Can you elaborate on that? Also being a very popular stock why don't you guys please start coverage on it? Also what is your earnings target for this in 2017?

Q: Jason Donville just released his Q3 newsletter:

http://www.donvillekent.com/pdf/DKAM-Newsletter-October2015.pdf

It's always a great read, but I thought your readers may be interested in what he has to say regarding CXR. Please note this is the last paragraph of a lengthy discussion in the newsletter:

"So, where to from here? CXR has completed its equity issue and its underlying businesses are strong. But we also know the company is carrying more debt than we would like. Going forward, we think the stock is still quite undervalued but the company will need to address its debt issue somewhere down the road. This could mean that the company raises more equity or puts itself up for sale. Regardless, at current valuations, I think the company is worth a lot more than $50 a share. On our numbers, CXR trades on 4.8x 2016 Cash Earnings and 1.1x BVPS, while earning a 24% ROE."

Q: Just a note re your previous reply on CXR. Canaccord's target revision is in US$ to US$55. There's also an article here: http://business.financialpost.com/investing/trading-desk/the-lights-are-dimming-for-specialty-pharma

Q: CXR getting crushed again. I have been selling PHM to buy more, but that has been a bad strategy so far. I thought I was high grading the acct with this move, but instead I have been suffering. Any new news on this disaster of a stock? Comments?

Q: I currently don't have any exposure to the healthcare sector. Would you please make a couple of recommendations.
Thank you

Q: Hi, Peter publish at own will.
No comments

A quick run on numbers (US) Health care

EPS growth
q2 15 8%
Q1 15 10%
q4 14 11.8%
q3 14 12.4%

Revenue growth
Q2 15 11.6%
Q1 15 17.6%
q4 14 22.3%
q3 14 16.3%