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Bought a tiny bit of this…

It is a tiny (£2.1m) investment trust.

It has  $1.4m (£1.1m) in cash (30/6/2016 HY report) – this doesnt screen well as it is held via a subsidiary….

The rest is a 24% stake in Stopharm and a 16.35% stake held via a convertible bridge loan.  This is valued at $6m (£4.8m) in the books based on an indicative offer.  In total this gives an upside of over 150%.  IF we get to NAV.

Stolfarm is a Khazakhstan pharmacy plausibly forecast to make $1.9m in 2016 – so the total valuation of Stopharm gives a PE of about 8. Kazakhstan’s economy and exchange rate has been erratic – going from 185 per USD to 335!  Apparently the economy has stabilised.

Costs are $500-600k per year.   This gives probably about 3 years to sell Stopharm until the company is in trouble…

The offer which hasn’t actually materialised is from  an insider – Capital Gate holding – originally announced 29th Sep 2014 – subject to monopolies approval.  On 30 June 2016 there was another expression of interest.  They are continuing to try and sell the stake.

The company also potentially has value as a cash shell / vehicle for something else.

Upside case is there is an offer for Stolpharm and the company distributes the money to shareholders and winds itself up – ideally at a large profit.

Downside is the asset is stolen in some way or the company delists and its a slow journey to getting the money back.

Shareholders are reasonably dispersed – largest is Richard Horlick – former director / founder.

Only have a small weight here – 2% portfolio weight – but I will add on weakness…

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