Paragon Care Limited

Update on the completion of its first tranche placement to China Pioneer: Paragon Care Limited (ASX: PGC) issued 1,004,167 fully paid ordinary shares at an issue price of $ $0.7167 each subject to rank equally in all respects with existing ordinary shares under the Dividend Reinvestment Plan. Moreover, Geoffrey Sam who had an indirect interest in the company had acquired 37,505 shares through the Distribution Reinvestment Plan. It was observed that PGC has issued 16,483,517 fully paid ordinary shares to Pioneer Pharma Australia Pty Ltd, as a wholly owned subsidiary of Stock Exchange of Hong Kong?listed China Pioneer Pharma Holdings Limited at a price of AU$0.91 per share. Following the completion of tranche 1 of the Placement, Paragon will have 302,187,703 shares on issue and China Pioneer will hold 5.45% of those shares. Resultantly, Pioneer Pharma Pty Ltd and its corporate bodies, Tian Tian Limited, UBS Trustees (BVI) Limited, and Mr. Li Xinzhou and Ms. Wu Qian became the substantial holder of Paragon Care Limited since September 14, 2018 by holding 5.45 percent of the voting power based on 302,187,703 ordinary shares. Further, the Settlement and allotment of Tranche 2 Placement shares of 33,934,869 will take place on or before 20 November 2018.


FY18 acquisitions significantly strengthen Paragon’s platform (Source: Company Reports)

From the analysis standpoint, PGC has a return on equity or ROE of 8.7% as at FY 2018 which implies the fall from 13.1% in 2017. The company has a current ratio of 1.88x in FY 2018 which is above the industry average of 1.31x. Moreover, Paragon Care Limited has a gross margin of 40.2% in FY 2018 as compared to 39.3% in 2017. However, in FY 2018, the company’s earnings before interest, tax, depreciation, and amortization or EBITDA margin stood at 13.3% while in the previous year it was 14.6%. While the financials are yet to be on a positive side, the share price has fallen 12.80% in the past three months as at October 12, 2018 and traded at the lower level. The company has P/E of 13.24x and beta of 0.24x as on 5-Year (monthly basis), signifying undervalued scenario at the current juncture. Therefore, by looking at its decent fundamentals and stability in the highly competitive market, we maintain our “Speculative Buy” recommendation on the stock (with dividend yield of 4.34%) at the current market price of $0.690.
 

Thorney Opportunities Ltd

Update on September Month NTA performance:Thorney Opportunities Ltd (ASX: TOP) is a small-cap company with the market capitalization of circa $141.52 Mn as of October 15, 2018. Recently, the Group posted Net Tangible Assets (NTA) per share before tax of 83.9 cents as on September 30, 2018 while NTA per share after tax amounted to 78.6 cents, representing a moderate rise of 0.7% and 0.1%, respectively as compared with previous month performance. The strong performance of TOP's five largest portfolio holdings (i.e., Service Stream Limited, AMA Group Limited, Money3 Corporation Limited, OneVue Holdings Limited, and Austin Engineering Limited) has contributed to the continued growth in TOP’s net tangible assets (NTA) which stood at an all-time high of 78.6 cents per share as at September 30, 2018. Moreover, the group expects that the upward trend is to be continued in the upcoming months on the back of its efficient management team and their strategy to choose the high quality holdings for its portfolio.


Net Tangible Asset backing per share (Source: Company Reports)

Thorney Opportunities Ltd, a substantial holder of Southern Cross Electrical Engineering Ltd changedits substantial holding and now holds 12.83 per cent of the voting power in the Company since 9 October 2018. Meanwhile, the share price has risen 2.21% in the past three months as at October 12, 2018 and traded around 52-week lower level of $0.660. On the valuation front, the company has PE of 11.70x and beta of 0.45x on 5-year basis, signifying undervalued scenario at current juncture. Hence, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $0.685, considering aforesaid facts and current trading level.
 

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