Yahoo Finance
Filing
Mar. 3, 2020
2019 Data, Year-end: Oct. 31.
Price: $0.23 Shares:12.6m, Cap: $2.9m
1.Business
(1) History
The company was founded by Steven Saviuk and went public before 1997. Raised over $5.6m for 12.4m shares over the years. Steven owns 2.9m shares by 2007. In the beginning, it invested in some public and private tech companies. By 2007 it just made even from investing.
In 2003 it bought Hywood Pharmachemical which generates very small profit each year. After many years this was devested.
The company founded Valeo Pharma in 2003 as a subsidiary with other parties and owns around 50% of it. Valeo Pharma acquires and market specialty drugs. In 2008, the company's interest in Valeo decreased to 41%.
The investment in Valeo was quite small. By the year 2010, it generated $5.8m in revenue and just made even for most of the years. In 2011 it generated $8.5m in revenue and 700k in profit. In 2012 revenue was 8.2m and profit was 500k. In 2013 revenue was 7.5m with 200k loss.
In 2014 the company sold most of its drug in Valeo to Valeant for $25m including $7m earn-out payment. By the end of 2014, it has $16m cash in its balance sheet and a book value of $20m. The stock was traded as high of $0.70 at one point. However, among the $20m book value, $10m belongs to third party interest owned to other Valeo shareholders. It also includes $6m in earn-out payment which it hasn't received yet. By the end of 2015, after paid cash to the 3rd party and $3m invested again in Valeo for new drugs, it only has 3.5m cash and 4.5m investments on its balance sheet.
From 2014 to 2019, the company continued to invest in Valeo to acquires new drugs. Around $16m was lost by Valeo operation during those years.
On Feb. 15, 2019, Valeo was IPOed in CSE (Ticker: CSE:VPH) and was traded between $0.40 to $0.80 since then. Currently, the company still holds around 21.8m shares of Valeo which around 38%.
(2) Major business
1. Valeo pharma: 21.8 shares. 38% of the total shares of VPH. Book value $8.6m. Around $0.40/share. Since Valeo's IPO on CSE, it seems MNX doesn't need to put more money in it. However, in accounting, Valeo's value is booked using the equity method. So future loss from Valeo will be logged as loss in MNX as well.
2. Investments.
The company has invested in private and public companies since the beginning. It did not disclose its public holdings while shows the private companies. It seems not really making any money from those investments.
(3) Debt
n/a
(4) Industry
n/a
2. Management
(1) Key person
Steven Saviuk is the founder and CEO of both companies. He seems to do well in the pharma business while it is not known in the investment part.
(2) Insider ownership & Compensation
Steven Saviuk owns 6m of MNX through Simcor Canada Holdings Inc. He also directly holds 1m shares. Totally he owns 55.5% of MNX.
Since MNX holds 21.8m shares of VPH. He is holding 12m of VPH through MNX. He also owns 4,214,145 Shares of VPH through Simcor Canada Holdings Inc. In total, he holds 16.2m of VPH, which is around 16.2/57=28.4%.
3. Financials
4. Valuation and comments
(1) Currently, its book value is around 16m while it is trading around 3m which is less than 20% of its book value. Even after removing VPH(8.6m) from the book, it is still trading less than half of the book value. Also, it is holding 4.75m shares of Ortho Regenerative(ticker: CSE:ORTH) which is $1m over book value.
(2) I think the main reason for the stock is so cheaply traded is that in 2014 after it sold its drugs to Valeant, there are lots of cash in its book but soon disappeared in the next year. There was some misunderstanding of its book and management intention. First, there was a 10m third party interest that claimed most of its cash on balance. Second, it intended to invest more money into Valeo after the sale which is totally OK for me.
(3) After the VPH IPO last year, the company does not need to fund Valeo anymore. Its regular SG&A expense should be less than 500k/year. Also, it seems to be able to generate around 100k in interest income. On the investment part, it is really hard to tell how it will perform.
(4) It is possible that the company might distribute some of its VPH or ORTH holdings to shareholders in the future.
(5) The stock is extremely illiquid. Also, the ask/bid spread is huge.
5. Risk
(1) Currently, VPH is still losing quite a lot of money each year. It could go to zero or be diluted if it can't make money in the long run.
(2) The investment part might continue to lose quite some money.
(3) SG&A expenses might go up.
6. Conclusion
Overall the stock is very cheap and the risk is quite small. However, it is very hard to purchase the stock without marking up the price. Also, it might take quite a long time to unlock the value.
7.Links
