Javelin Pharmaceutical (JAV US) AMEX - Part 2

Well the lengthy part 1 was worth it, the write up made the case much easier to read.
On 1 July 2010, option #3 of the 4 available option (with highest probability) occurred.
At entry of US$1.42, the exit of US$2.20 offers an upside of 54.9% in over 2 weeks.


Hope you guys learnt as much as I did, I will strive to write more on ideas from other markets apart from Singapore which I feel has a current dearth of excellent ideas. Do feel free to write in wherever you are on the globe to exchange and discuss ideas.


Thanks and happy investing.


Javelin Pharmaceutical, JAV US

Parkway Takeover Saga

Battle between Fortis Healthcare (India) and Kazanah (Malaysia)
Sorry for the late reply, I have not been honestly keeping track on this since its overpriced deal. 
But now it is interesting to relook now that some situations have unfold.


Background 

• Parkway is Asia's largest healthcare operator with 16 hosiptals and 3400 beds in Asia
• 60% of revenue is derived from Singapore operations
• Parkway also owns 31% of Pantai (Khazanah and Parkway JV) which has 2 Malaysian healthcare concessions. This 31% was subsequently took private and swapped with 40% stake in Pantai Irama which bought Pantai private. Khazanah than owns 60% of the end parent entity, Pantai Irama
• Parkway also owns 35.4% of parkway Life REIT
• 11 March, Fortis bought 23.9% stake in Parkway Holdings at S$3.56/sh for S$959.4 mn from TPG's exit
• Fortis owns 25.4% currently and Khazanah owned 23%
• May 27, Kazanah offered S$1.18 bn (US$ 835 mn) or S$3.78/sh with 25% premium to double its stake to 51.5% (partial offer)
• Parkway’s shares surge 23% to S$3.71 (highest since Nov. 5, 2007)
• Fortis shares rose 0.4% to 140.45 rupees

Updates 

• Fortis ups stake from 23.9 to 25.29% from March to May 2010
• 9 June, Fortis plans to raise 27.5 bn rupees (US $ 585 mn)
• Fortis’ board approved increased borrowing limit to 60 bn rupees (US$ 1.27 bn), including selling 22.35mn preferred shares including a 7% stake of 3.8 bn rupees to GIC (Govt of Singapore invest corp) 
• Parkway climbs 1.6% to S$3.83 and Fortis down 0.7% to 139.5 rupees
• 18 June, Reliance reportedly eyeing 26% stake in Fortis (Rumour)
• Fortis needs to submit general offer for Parkway by July 30
• 30 July Fortis submits general offer of S$3.80 /sh general offer for all shares

Expectations 

• Other regional competitors include Pantai, Apollo Hospital and IMU health Sdn Bhd
• From the looks of it, Fortis can raise estimated 87.5bn rupees or S$ 2.63bn
• Malaysia is the crown jewel of Parkway's overseas operations but Pantai Irama remains the key to unlocking shareholder value and can be a stumbling block to Fortis 
• Singapore takeover rules do not allow Fortis to make a partial general offer for Parkway shares as it (Fortis) had acquired shares in the target company within the last six months
• That would cost Fortis some S$3.4bil (US$2.4bil) to buy out all the remaining shares in Parkway that it does not own
• Expected counter offer at 5-6% premium at most (given the limited fund raising from Fortis), implying at best S$4/sh bid price

Parkway Healthcare, Fortis Healthcare, Khazanah, Pantai

Lion Asia Pac (LAP SP) SGX - part 2

Background
Continuation from part 1, firm sold its Chinese automobile business and a $0.15 per share dividend or (S$ 60.8mn) was given on April 2010. After a period of inactivity, firm proposes another $0.10 per share or (S$40.5mn) ex 13, payable 29 July 2010.


Financials 

• Cash pre both dividend is S$188.416mn or S$0.46 per share
• Borrowings are at S$0.371mn 
• Share number is at 405.522704 mn x price of S$0.26 (close) = S$105.43 mn
• Price rallied to S$0.330 today alone
• After giving the latest dividend, firm will still have S$87.04mn or S$0.21
• A fair price range to exit will be S$0.28-S$0.31and lower for buy in ranges

Expectations 

• Current price is way over the distribution and overall value of the firm
• Decided to not take action on this due to low margin of safety
• Was unwilling to lock up capital at S$0.26/sh and wait out for the S$0.05/sh increase
• The wait out I deemed unlikely since it has given a prior S$0.15/sh dividend and management should use the remaining cash to strengthen their very weak operations
• Turns out I was wrong and underestimated the forces of "activist" shareholders and the ownership of LAP stock by the manager himself

Risks

• Amid the flurry buying the counter, one has to note their operating business is getting poorer QoQ
• Top line has been reduced substantially even though they attempted to increase capex for their quick lime business

Lion Asia Pac, Lion Asia Pacific, Lion Asiapac, LAP SP, SGX, Lion Asia