RE:RE:RE:RE:Cheap Valuationlongrun86 wrote: Hi folks,
For individual investors, time is one of the only advantages we really have compared to institutions. I can sit here and look at the share price do nothing for a while just as long as the base business is growing and generating appropriate returns. Conversely, funds and institutions have to worry about quarterly performance versus benchmarks in order to appease their short term investor base.
With that said, there are some catalysts on the horizon for Knight that I think should be addressed by Management.
1. Loan Portfolio: There should be about $25 million USD that gets freed up in the Loan book. The market conditions could be opportunistic for Knight to do something bigger either with the companies (M8 comes to mind).
2. Investment Portfolio: I would like to see more visibility on the funds. The notes in the financial statements are a bit skinny considering how much is invested in each fund. For example, I have not been able to locate target roll-over dates for these funds or return attribution. While the return profile of these might be attractive, Management considers this to no longer be strategic; therefore, the sooner these funds convert to cash, the sooner the funds can be deployed into something Management deems strategic. I do think that if Management found an opportunity to acquire something that they would be able to leverage against the loan portfolio in a conservative fashion.
3. Revenue Guidance: Revenue guidance has always been on the conservative end which is fine; however, I would like there to be a bit more insight into the expected revenue growth by category as well as some expectation of the revenue profile of the new drugs coming online in the upcoming year.
4. M&A: In previous conference calls they have indicated that they are looking at quite a few prospective deals (not clear whether this is company acquisitions or licensing deals). I would like to see them execute whether that is in Mexico, Columbia, Canada, or elsewhere (at the right price). There could be further areas to explore in the branded generics and it would be nice to find another geography to manufacture other than Argentina.
5. CRA Tax Dispute: Knight has $41 million in deposits it has made with the CRA for the sale of the PRV from 2014. This is currently with the Tax Court of Canada. I have been keeping an eye on the filings and status. At this time it appears that at the end of November 2022 a timeline was established for the case (the timeline isn't publicly available). In December and January documents have started to flow back and forth. I would like Management to publicly comment on the court timeline. It would be nice to get this cash back in the next year or so.
6. Overall Market Apathy: The market is bored with Knight and doesn't see catalysts for value creation in the near term. Between the tax dispute and the loans, there is at least $70 million that could convert to cash and be used for something. I believe that there are significant opportunities but that Management isn't communicating this effectively. Buying back shares is great at these prices but I would like Management to shed a bit more light on these items that are clearly important to investors view on the future of the company.
LR
Well said Longrun - lots there - lots to do in making this a success.
It just takes time to become popular with markets.
In this industry it's even harder to get people excited.
Probably why some past investors wanted them to go somewhere new - get there faster.
Just not how this team operates.