AscentPharma (APH) - A steal at 40c a share

Further to my earlier post regarding the Strides announcement just a few weeks back (Dec 1),  APH this morning  released details of the Strides scheme of implementation agreement.  Strides have increased their offer from the original 35c to 40c, valuing APH at $100m.  At the same time APH have indicated that their FY2010 NPAT is likely to be in the range of $11.5-$12m.

APH have appointed KPMG to provide the independent expert's report on whether the offer is in the best interests of shareholders.  While I'm happy with the increased offer, a price tag of $100m values APH on a P/E of 8-9 - extraordinarily cheap for a generics business exhibiting the sort of growth that APH has done over the past few years.   Strides itself trades at a P/E of 15.  

Were there any semblance of competitive tension in this process, APH should be selling for at least $120m+ but given Strides' dominant 60% stake it is unlikely that anyone will gatecrash this little party.  All the figures being quoted of premium to VWAP and last traded price are indicators of mis-pricing, not of true value.  APH at 40c a share is a bargain and Strides knows it.  

Valad Property Group (VPG) - An inside view

It's always interesting when directors or management provide real indications of where they think a business is headed.  Commentary in annual reports and investor presentations varies in its level of usefulness but it's a different story when management signal their intentions with skin in the game. 

Valad Property Group came to my attention earlier this morning, with an ASX announcement stating that the board had received a proposal for acquisition of the European business by certain Valad management personnel.    

Valad recently undertook a share consolidation of 20:1.  At the recently traded price of $1.20, the pre-consolidation share price works out at $0.06 a share, against the NTA from the most recent annual report of $0.13 a share ($2.60 post-consolidation).  The MBO proposal may be an indicator that there is some value to be gained at current prices. 

Disclosure: VPG (Long - as of this morning)

AscentPharma (APH) - Strides ahead

In March 2010, AscentPharma issued a release indicating that they had received an indicative offer from their majority shareholder, Strides ArcoLab, for the remainder of equity at 35c a share.  Punters hoping to make a quick return on the deal will have been disappointed.  Eight months later and  progress since the initial announcement has been limited, though there have been signs that Strides is still interested.  

In August, Strides picked up 3% in an offmarket trade at 35c (taking them to over 60%).  Then in September, Strides completed an institutional placement to raise US$100m, which they announced they were earmarking for overseas acquisitions.  The most recent update from APH in November indicated that any eventual deal would need to be completed in 2011. 

In the interim, APH released their HY10 results, which suggest that Strides will be getting a good deal, if it can get the rest of APH at 35c a share.  That would value APH at a PE of c.8x trailing 12m earnings.  As at time of writing Strides was trading on the Bombay exchange at a PE of c.14x.  

At yesterday's 29c close, APH looks good value for a 20% return in the next 12 months if the offer for 35c comes through.  Given the bargain basement offer, if the independent directors can wrangle a little more out of Strides, it could be even better.  

Disclosure: APH (Long)