Patient Home Monitoring (PHM.v) is a microcap listed on the TSX-V with FY2014 sales of $21M CAD. It's headquarters and operations are in the US.PHM's strategy is to acquire small, privately-held companies with services and products geared to home-based health care, and to use the acquired customer databases to cross-sell these products and services for organic growth. PHM's strategy benefits from three trends -- a growing population of the elderly with chronic disease, a shift in compensation for home-based health care, and a large, fragmented market of very small companies serving the chronically ill.PHM was one of Jason Donville's three top picks on 12/24/2014 with a December 2015 target of 1.50 CAD. Last week on BNN Market Call he rated it a buy with a 1.75 CAD target. It is loved by other Canadian money mangers as well.I bought into PHM shortly after Donville's call at the end of December, and sold it yesterday for a 30% gain. Normally I'd look at something like this as a long-term holding. However, after looking at the FY2014 financial statements released at the end of January, I'm not comfortable with the quality of what these guys are buying. In the footnotes of the year-end statements, the allowance for doubtful accounts is $5.3M -- an astonishing number. The allowance for doubtful accounts is 41% of AR and 25% of sales. So the sales numbers are not really what they seem and it's clear they are purchasing distressed assets.There are a number of other reasons I dislike this business which I won't go into here because the bad debt issues are enough to turn me away. These folks talk a great story, and the analysts seem to be buying into it. So there's a good chance I'm wrong. I can see it getting to Donville's target by year-end because of the almost universal love, but for now it won't be with me. I'm out -- I'm going to wait and see how it develops.Thanks,Ears
cool. how big did you make this position..
how big did you make this positionI don't manage money for other people, so fwiw...less than 1%.
Ears,I think you are prudent to unload your shares of PHM. Tonight I had a look at PHM for the first time in about a year. So, PHM has about 153 million shares outstanding, for a market cap of $165 million. Management has been very generous granting themselves 20 million options outstanding, most of which exercise at under 25 cents and there are 40 million warrants outstanding at about 38 cent average. So total of about 213 million shares diluted with maybe $20 million in cash coming in from exercise of warrants and options if exercised. Back of the envelope, I went through and they have paid about $17 odd million for acquisitions in the last 2 years. I had their original INR business pegged at $8 million max. Maybe it's grown a little. We'll give it a generous $10 million valuation. That gives a value based on acquisition of $27 million. Has management been able to increase the value of these businesses by a factor of 5X in a year? That is some serious financial engineering. There are still related party transactions going on here. They haven't had a single profitable quarter, and they are releasing adjusted EBITDA numbers that eliminate stock based comp, which is very significant. They are very promotional, as they press release every single letter of intent, never seen that before. I would be surprised if they report an IFRS net profit at all in 2015. Even if you give them the benefit of the doubt, and say they are on pace to generate the $9.4 million in EBITDA from their Jan 29, 2015 press release (which again eliminates stock based compensation), you are still at an EV/EBITDA of 16.5X. I don't think this business is worth anything close to that. Also, cross selling services sounds like a great strategy in theory, but is a medicare patient in Georgia who is monitoring their INR with PHM test strips really going to order their respiratory services like oxygen tanks from South Carolina. I just don't get the cross selling thesis here. That's all in addition to the doubtful accounts receivable that ears pointed out. Anyways, Ben can take on Donville on HCG (with real money) and ears and I will take the other side of the trade with Donville on PHM (with our play money).
Well PHM.v is up about 50% since my last post on this. My opinion on the company hasn't changed, and they recently issued a quarterly results news release that failed to disclose a net income figure. However it did tout a metric called net profit before stock based compensation. I am pretty sure they omitted the net income figure because the quarter was another in a long line of unprofitable quarters. I still think PHM will eventually blow up, but right now Michael Dalsin is a rock star and this could go on a lot longer than I thought if they keep issuing stock at ever higher levels. There are just some things that I don't understand and never will.
I still think PHM will eventually blow up, but right now Michael Dalsin is a rock star and this could go on a lot longer than I thought if they keep issuing stock at ever higher levels. There are just some things that I don't understand and never will. I wonder if my fellow investors in the Great White North are suffering from rollup fever. Not every set of stars forms a constellation and not every rollup becomes a CSU-TO.ET
There are just some things that I don't understand and never will.Ditto, but it gets worse...his next one was CXV.v -- the recent buying on that lends even more support to the greater fool theory. And I think he has another one in the works after that! lol, of course I'll probably be eating these words a year from now.On the SI Canada Microcap Kitchen the reaction seems to be relatively sanguine. Nothing I can see about the accounting or value red flags. About a month ago I emailed Jason Donville about the bad debt issues with PHM.v and he replied they were aware of it and were "monitoring their investment". I'm looking forward to his next Market Call. All the other analysts are on board Dalsin's train, or if not it's because they think the stock is going to take a breather.
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