{"id":14440,"date":"2025-05-19T16:02:02","date_gmt":"2025-05-19T15:02:02","guid":{"rendered":"https:\/\/thndr.horizondm.com\/blog\/?p=14440"},"modified":"2025-05-20T13:41:48","modified_gmt":"2025-05-20T12:41:48","slug":"phgc-all-options-are-open","status":"publish","type":"post","link":"https:\/\/thndr.horizondm.com\/blogpost\/phgc-all-options-are-open\/","title":{"rendered":"PHGC: All Options Are Open!"},"content":{"rendered":"\n<p><em>Answering your questions on the stock and its tradable right<\/em><br>By: Amr El Alfy, MBA, CFA<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Looking Back \u2014 and What\u2019s Changed<\/strong><\/h2>\n\n\n\n<p>About a year ago, we advised investors to avoid City Lab [CILB] because of its small size and a strategy that is yet to be proven. Fast forward to today, and the company\u2014now called <strong>Premium Healthcare Group [PHGC]<\/strong>\u2014is undergoing a significant transformation. You can think of it as \u201cCity Lab 2.0.\u201d<\/p>\n\n\n\n<p>So, what\u2019s happened since then?<\/p>\n\n\n\n<p>In November 2024, PHGC shared a study outlining its expansion plans in Egypt as well as outside Egypt. It\u2019s targeting Saudi Arabia, the UAE, and Jordan. We saw two main parts to this plan:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Local expansion:<\/strong> By acquiring other operating businesses including labs in Egypt.<\/li>\n\n\n\n<li><strong>Regional expansion:<\/strong> Through partnerships with labs in each new market.<\/li>\n<\/ul>\n\n\n\n<p>And now, PHGC is moving forward with that plan through a <strong>massive capital increase<\/strong>\u2014growing its paid-in capital by <strong>29 times<\/strong>, from EGP81.5 million to EGP2.36 billion. Most of that increase is coming through a <strong>debt-to-equity swap<\/strong>.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What\u2019s Behind the Capital Increase?<\/strong><\/h2>\n\n\n\n<p>Over the past year, PHGC acquired several businesses. It paid for some in cash, but the rest (worth EGP1.32 billion) was recorded as \u201cdues to related parties\u201d\u2014essentially money it owes to the sellers of those businesses.<\/p>\n\n\n\n<p>To settle that debt, PHGC is issuing new shares. The sellers will receive PHGC shares in return for their ownership in the businesses acquired. So instead of being creditors, they\u2019ll now become shareholders.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Why Investors Are Asking Questions<\/strong>?<\/h2>\n\n\n\n<p>This capital increase is huge\u2014and it changes the game for current and potential investors. Many of you have asked whether you should participate or not. Before you decide, here are a few key points to consider.<br><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The Most Important Question: What If I Don\u2019t Subscribe?<\/strong><\/h2>\n\n\n\n<p>If you\u2019re eligible to participate in the capital increase but choose <strong>not<\/strong> to, your position will likely take a big hit.<\/p>\n\n\n\n<p>Here\u2019s why:<\/p>\n\n\n\n<p>The number of new shares being issued is <strong>28 times<\/strong> the existing number, and they\u2019re being offered at <strong>just 10% of the stock\u2019s market price before the ex-right date<\/strong>.<\/p>\n\n\n\n<p>So, you\u2019re left with two choices:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Subscribe<\/strong> to the capital increase to protect the value of your investment.<\/li>\n\n\n\n<li><strong>Sell your rights<\/strong>, but keep in mind those rights have dropped about <strong>70%<\/strong> since they started trading. You\u2019d be selling at a steep loss.<\/li>\n<\/ol>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>But What If My Portfolio Is Already Down?<\/strong><\/h2>\n\n\n\n<p>Many shareholders are seeing losses in their portfolio. But those losses are likely due to the drop in the value of the rights\u2014not necessarily the stock itself.<\/p>\n\n\n\n<p>Here\u2019s how to think about it:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You might be <strong>up<\/strong> on the PHGC shares you originally bought.<\/li>\n\n\n\n<li>But you\u2019re probably <strong>down<\/strong> on the PHGCr rights you received.<\/li>\n<\/ul>\n\n\n\n<p>To avoid locking in those losses, <strong>subscribing<\/strong> is your best option\u2014it helps protect the total value of your holdings.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What Are the Risks?<\/strong><\/h2>\n\n\n\n<p>There are a few important things to keep in mind:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>PHGC is still listed on the <strong>SMEs stock market<\/strong> (formerly Nilex), which is more volatile and less liquid than the EGX main board.<\/li>\n\n\n\n<li>The company plans to move to the EGX after this capital increase\u2014but it\u2019s unclear how the stock will perform post-transfer.<\/li>\n<\/ul>\n\n\n\n<p>The owners of the acquired businesses (who are subscribing with their dues) will <strong>own most of the new shares<\/strong>. While 25% of their shares will be locked up for 2 years, they\u2019re <strong>free to sell the remaining 75%<\/strong>, which could pressure the stock price when those new shares start trading.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>So Why Is PHGC Raising All This Money?<\/strong><\/h2>\n\n\n\n<p>The simple answer: to <strong>fund its expansion strategy<\/strong>.<\/p>\n\n\n\n<p>Here\u2019s the breakdown, based on PHGC\u2019s 2024 financial statements:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>EGP1.32 billion<\/strong> (58%) is being paid in kind\u2014by settling the money owed to sellers of the acquired businesses.<\/li>\n\n\n\n<li><strong>EGP963 million<\/strong> (42%) is being raised in cash\u2014from PHGC\u2019s existing shareholders who choose to subscribe.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Dates to Remember<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>6 May 2025:<\/strong> PHGC traded <strong>ex-right<\/strong> (buying the share no longer comes with the right to subscribe).<\/li>\n\n\n\n<li><strong>8\u201329 May 2025:<\/strong> The tradable right <strong>PHGCr<\/strong> is being traded on the market.<\/li>\n\n\n\n<li><strong>8 May \u2013 3 June 2025:<\/strong> Capital increase <strong>subscription window<\/strong> is open.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Can You Make a Profit by Buying the Rights Now?<\/strong><\/h2>\n\n\n\n<p>To answer that, compare what you\u2019d pay (right + subscription cost = EGP0.11\/share) to the market price of PHGC.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>As of last Thursday, PHGCr was <strong>\u201cin the money\u201d<\/strong>\u2014meaning you could profit if PHGC stays above EGP0.11\/share.<\/li>\n\n\n\n<li>If the right\u2019s price increases, the profit margin narrows.<\/li>\n<\/ul>\n\n\n\n<p>It\u2019s key to monitor <strong>the total payoff<\/strong> of the right, not just its market price.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Your Options \u2014 Based on Your Situation<\/strong><\/h2>\n\n\n\n<p>You can also download this <a href=\"https:\/\/docs.google.com\/spreadsheets\/d\/1hmc4aIIpsdiPGDD1CkuE6fX0ThlOpEMl\/edit?gid=210830319#gid=210830319\">sheet <\/a>to model different scenarios based on your own cost basis.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>If You Bought Before 6 May (e.g., cost basis = EGP1.04\/share)<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You now have rights equivalent to 28x the number of shares you had.<\/li>\n\n\n\n<li>You\u2019re likely <strong>up 93%<\/strong> on your shares, but <strong>down 69%<\/strong> on the rights\u2014<strong>net portfolio down ~49%<\/strong>.<\/li>\n\n\n\n<li><strong>Recommended:<\/strong> Subscribe to reduce your cost to EGP0.132\/share.<\/li>\n\n\n\n<li><strong>Break-even:<\/strong> PHGC would need to drop over <strong>48%<\/strong> for you to start losing money.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>If You Bought After 6 May (e.g., assuming cost basis = EGP0.150\/share)<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You don\u2019t have any rights.<\/li>\n\n\n\n<li>You\u2019re likely <strong>up ~70%<\/strong> on the stock.<\/li>\n\n\n\n<li><strong>Recommended:<\/strong> Consider taking profit if you\u2019re happy.<\/li>\n\n\n\n<li><strong>Break-even:<\/strong> PHGC would need to drop over <strong>41%<\/strong> for you to start losing.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>If You\u2019re Not a Shareholder (cost basis = EGP0.010\/right)<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You can buy PHGCr and subscribe at EGP0.10\/share.<\/li>\n\n\n\n<li>If you do, you\u2019d be up <strong>~132%<\/strong> on the portfolio.<\/li>\n\n\n\n<li><strong>Recommended:<\/strong> This could be a good trade if PHGC stays above EGP0.11\/share.<\/li>\n\n\n\n<li><strong>Break-even:<\/strong> PHGC would have to drop more than <strong>57%<\/strong> for you to start losing money.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What About the Company\u2019s Valuation?<\/strong><\/h2>\n\n\n\n<p>We haven\u2019t done a full valuation exercise yet, given PHGC is still on the SMEs board and the performance of the merged group isn\u2019t fully known.<\/p>\n\n\n\n<p>But we do know this:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>PHGC\u2019s 2024 consolidated net earnings = EGP241.5 million<\/strong><\/li>\n\n\n\n<li>At <strong>EGP0.255\/share<\/strong>, PHGC\u2019s market cap = EGP6.03 billion \u2192 <strong>P\/E = 25x<\/strong><\/li>\n\n\n\n<li>That\u2019s <strong>much higher<\/strong> than its peer, <strong>IDHC<\/strong>, which trades at <strong>10x<\/strong>.<\/li>\n\n\n\n<li>At <strong>EGP0.11\/share<\/strong>, the implied P\/E is <strong>10.8x<\/strong>\u2014much more reasonable.<\/li>\n<\/ul>\n\n\n\n<p><strong>Bottom line:<\/strong> The key will be whether PHGC delivers strong growth after the capital increase.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Final Thoughts<\/strong><\/h2>\n\n\n\n<p>Here\u2019s how we\u2019d sum it up:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Bought PHGC before 6 May<\/strong>? \u2192 <strong>You should subscribe<\/strong> to protect your investment.<\/li>\n\n\n\n<li><strong>Bought PHGC after 6 May<\/strong>? \u2192 If you\u2019re in profit, <strong>consider taking it by selling<\/strong>.<\/li>\n\n\n\n<li><strong>Not a shareholder yet<\/strong>? \u2192 This might be an opportunity <strong>if you\u2019re comfortable with risk<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p>\u26a0\ufe0f Keep in mind: Subscribed shares won\u2019t be tradable right away\u2014you\u2019ll be exposed to market moves in the meantime.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Answering your questions on the stock and its tradable rightBy: Amr El Alfy, MBA, CFA Looking Back \u2014 and What\u2019s Changed About a year ago, we advised investors to avoid City Lab [CILB] because of its small size and a strategy that is yet to be proven. Fast forward to today, and the company\u2014now called [&hellip;]<\/p>\n","protected":false},"author":32,"featured_media":14446,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-14440","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/posts\/14440","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/users\/32"}],"replies":[{"embeddable":true,"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/comments?post=14440"}],"version-history":[{"count":7,"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/posts\/14440\/revisions"}],"predecessor-version":[{"id":14466,"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/posts\/14440\/revisions\/14466"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/media\/14446"}],"wp:attachment":[{"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/media?parent=14440"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/categories?post=14440"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thndr.horizondm.com\/blogpost\/wp-json\/wp\/v2\/tags?post=14440"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}