2nd Part22 Sep 2013 15:18
Jim Mellon is a renowned fund manager and investor who has spent much of the last few years researching the biopharma sector, partly basing himself in San Francisco. He has an interest in 4.441 million shares in Port Erin, representing 13.5% of the issued share capital. He is also interested in 2.1 million (out of 30 million) warrants for new shares, these exercisable at 12.5p each to September 2013. Remuneration to the company providing Mellon’s services is payable by the issue of shares equivalent to 15% of any increase in net asset value over each quarterly period, with such payments waived until net asset value exceeds 10p per share (the IPO price). These are not generous terms and, although Mellon is very wealthy, Port Erin investing alongside his own portfolio investments should mean he is pretty focused on this venture. Jim has been a consistent buyer of the shares since IPO. And he has also established structures which keep admin costs to a minimum. Everything at PEBI is focussed on driving up NAV
On the 1st November Port Erin announced its results for the period from the company’s 3rd May 2011 incorporation to 30th June 2012 and this showed a profit of £425,208 and net assets at the period end of £3.12 million – equating to 9.47p per share. This represented an impressive performance since the share placing on Admission raised a net £2.70 million after expenses. The recorded profit was largely the result of £510,515 from investments (£16,448 of dividend income, £226,308 of net realised gains on sale of investments – from sales totalling £1.36 million – and £267,759 of net unrealised gains on investments). The running costs of the business were limited to less than £95,000 as the company is being “very careful to minimise on-going operating expenses”. Frankly I can think of few AIM companies that are run with such a low cost base. All credit to Jim on that one – it shows the real benefits of having a management team with interests aligned to other investors via equity ownership
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An update as at 30th September 2012 showed that the net asset value had risen to £3.18 million – equating to 9.63p per share, with investments totalling £2.86 million and un-invested cash £329,708. Bear in mind that post IPO costs the NAV was c 8.56p per share just over a year previously and you will see how, over one year Jim has delivered pretty decent gains.
An investment in this company is effectively an investment in Jim Mellon’s abilities in the biopharma sector. His investment track record provides confidence, but there are no guarantees. This is particularly the case in Port Erin’s area of focus – with most drugs under development failing to eventually reach market and the drug development process typically requiring significant amounts of capital.
At the present share price, the stock trades at a 45% discount to the last
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