The combined market cap of the two securities is 53m (24.6m PPX, 28.5m PXU). Using 2014 info there should be 15m EBIT which equates to 3.5x. Seems quite cheap to me. There are of course lots of uncertainties and unresolved issues:
- Cash from Canadian sale. Dec report suggests that 50% was required to be submitted to Europe after pay down of local facilities. It is possible the rest is available. Sale price was C$63m with book value written down to 56m. The difference between the two is likely the debt adjusted for forex rates (roughly 9m aud)
- Operating costs of new entity. I would expect this to come down as they will now be a smaller operation
-Interest. There doesn't seem to be any major local debts per 2014 AR. The interim report does not break down the facilities
- Taxes. What tax losses if any are available to entity?
- How the remains are shared between the two classes. I think the directors should talk to major holders of classes and come to a mutually beneficial agreement. Payment of optional distribution plus 312 PPX for every PXU may work given the amounts we have lost. As I have said before PPX and PXU are both trapped by the status quo. And what happens to the ordinaries if there is a takeover offer and PXUs are converted at 2500 to 1 according to the pds? Best we sort this out sooner rather than later.
In summary I think there is still a lot of value on table and would appreciate it if management came forward and articulated their vision for the future.
SRS Price at posting:
3.9¢ Sentiment: Hold Disclosure: Held
