Sold my entire position in PRXI. Although there is nothing I dislike about the company, I think my other current holdings have a better short-term movement potential.
Sun Pharma held their year end analyst conference call today. Although the transcripts will take a few days to be posted online, here is an interesting tidbit related to Caraco from the conference call:
The troubles at the Caraco plant would hopefully get over this year and the unit will start commercial production, the company said in an analyst meet held here on Monday.
So this is 6 months from now. We know that the Sun Pharma management tends to be extremely cautious. My gut feeling is production restart could be much sooner than 6 months. Now even if it takes 6 months, at current prices you are looking at at-least a double in that time period. I don’t understand why the shares dropped off today, but based on the 6 month time period I see CPD having enough cash to make it through without a problem.
Caraco in its typical earnings reporting style released their earnings right before Sun Pharma’s issuance. Caraco doesn’t care even care if the earnings release happens on a Sunday. Well the Sunday release had some good news for us:
On September 29, 2009, Caraco voluntarily entered into a Consent Decree with the FDA regarding the Company’s drug manufacturing operations. Under terms of the Consent Decree, the cessation of manufacturing operations will continue until Caraco receives written notification from independent experts and the FDA that it is in compliance with cGMP and can resume operations. The Company submitted a remediation work plan to the FDA and this work plan has been approved by the FDA. Remediation activities are ongoing under the supervision of cGMP experts. The Company has subsequently recalled some of the laid-off employees in conjunction with its efforts to restart its manufacturing activities.
In the Q3 earnings report, we heard that the company had submitted the plan to the FDA and the company was working with the FDA to resolve some concerns. It is great news that the company has now resolved all of FDA’s concerns. The company now has a plan that will allow the company to get back into cGMP compliance and restart manufacturing.
The cash burn for Q4 wasn’t good. The company had $76M of cash at Q3. At Q4 the cash was at $65M. A big drop from what I was expecting. Although the company still has plenty of cash to make it through until manufacturing restarts, I dislike seeing cash burned.
It seems like the company is very close to restarting production. I’m quite excited about the next couple of months, I expect them to restart manufacturing very soon.
ValueAct Capital bought a 6.2% stake in TNDM in late April, early May.
Here is some blurb about ValueAct from their website:
ValueAct Capital concentrates on acquiring significant ownership stakes in a limited number of companies that it believes are fundamentally undervalued. The investment team seeks to identify companies that are out of favor, or may be undergoing significant transition. Such companies may be temporarily mispriced for a variety of reasons, including perceived unfavorable industry conditions, poor business performance, changes in management or ownership, reorganizations, or other external factors. These conditions can often result in fundamentally “good” businesses that are available at depressed valuations. The goal in each investment is to work productively with management and/or the company’s board to implement a strategy or strategies that maximize returns for all shareholders.
ValueAct Capital is typically one of the largest independent shareholders at each of its core company investments and works in a constructive manner with management and/or the company’s board to successfully implement strategies that generate superior returns on invested capital. The six investment partners have extensive experience working effectively with portfolio companies as long-term large shareholders, and oftentimes as members of the companies’ boards. At any given time, the portfolio consists of ten to eighteen core company investments, as well as a small “farm team” of additional investments in development.
It is still too early to know what ValueAct has in mind. Although my guess is that TNDM’s huge cash balance, strong cash flow, and potential game changer with the ethernet exchange business could be a big draw. Management has said they wouldn’t shy away from making an acquisition or putting the cash to work. It will be interesting to see what ValueAct has in mind for the company.
If we look back at the recent quarterly earnings and conference call, I see the following catalyst in the near future:
– Drilling the first well in Indonesia in June or July
– Some interest by third party to acquire a stake, or entire interest, in Gabon
– Drilling 5 additional wells in Bar-F in Utah, which should prove the land position
– Receiving a dividend from Petrodelta
– Drilling a 2nd rig in Venezuela
Overall, the management has said the second half of the year looks very interesting. I think 2010 will be a big year for HNR. The big catalysts for the year are: production in Utah, update from Indonesia, potential activity in Gabon, and increased production in Venezuela. Each one of these alone can substantially alter the company’s valuation. So far the company has been making strides on each one of these areas.
The management has already hit the ball hard. In couple of quarters we will know how far the ball went.
Orion Energy reported quarterly earnings yesterday. The company’s estimates for the coming fiscal year was well below analyst expectations. In the near term the growth might now show up, I still think long run their business model is very strong. The huge drop today was a great chance to buy into it.
I will post more thoughts on this later. For now you can read an older write-up on the company.