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The last name we wanted to highlight from Planet Microcap is PharmaCorp Rx. Enjoy!
WHAT'S ON TAP
HOT OFF THE PRESS
Foodtastic takes $1B run at MTY Food
After announcing a CEO transition, MTY Food (MTY) got a $1B hostile bid from Foodtastic, which represents a 31% premium to Monday’s close but sits in-line with 2026 highs - as three years of negative growth…
… and flat EBITDA have put significant pressure on the stock. To be fair, headwinds to growth and profitability are an industry-wide dynamic…
… with food inflation, rising wages, and affordability pressure driving restaurant multiple compression…
… which has resulted in a wave of take-privates including Wendy’s, Pizza Hut, and Denny’s among others. While being out of the public eye would likely accelerate MTY’s closure of unprofitable stores…
… a deal looks unlikely for now, with the company already rejecting the bid in private and the stock closing ~15% below the offer.
PharmaCorp: pharmacy roll-up with runway?
PharmaCorp Rx (PCRX) is a pharmacy roll-up with 16 stores and a 3,000+ store pipeline comprised of 1,150+ PharmaChoice banner locations (exclusive ROFR)…
… and 2,000+ McKesson stores. Its current network generates ~80% of its revenue from prescriptions, which has tailwinds from population aging…
… and upside from service expansion and cost optimization. For deals that meet their criteria ($2M+ revenue, $350K+ EBITDA), management targets a 7.5-15% EBITDA uplift three years post-close…
… and a ~6x deal multiple, enabling it to fund M&A with equity at current prices if they bump up against their 2.5x leverage ceiling.
It’s early days which brings risk, but with strong pharmacy and roll-up experience on the bench (StorageVault co-founder, Rexall, etc.) and a defined pipeline… we think it’s worth keeping an eye on.
ON OUR RADAR
GAINERS & LOSERS
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5N Plus (VNP) rallied 25% on the back of its Q3, which beat on the top line thanks to 34% growth in specialty semis and 20% growth in performance materials…
… and crushed on profit, which puts the company on track to exceed the top end of guidance - something we’ve seen from them in the past two years.
5N reported record bookings of $164M during the quarter, driving the backlog to new highs - underpinned by strong demand in its space business…
… which the company is adding capacity to support. With upside from a bismuth competitor losing its certification and growth in medical imaging, there’s runway for VNP to grow into its multiple.
Shopify (SHOP) finished down 8% despite a strong Q3, which delivered 32% revenue growth on a 29% increase in GMV…
… that tracked in line with analyst estimates, bucking the recent trend of modest outperformance relative to forecasts. That could have driven some selling…
… alongside Q4 guidance, with management calling for flat Y/Y FCF margins due to marketing initiatives and infrastructure investment.
So, you have a superficial driver and a near-term capital allocation decision (which SHOP has proven competence in repeatedly) causing yesterday’s selloff…
… which will likely be met with a ramp in buyback activity if it continues.
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