- There is currently a huge valuation gap/mispricing between Propnex and APAC.
- At $0.585, Propnex is trading at 13.3x FY17 P/E with a market cap of $216.5m.
- At $0.605, APAC is trading at 7.5x FY17 P/E with a market cap of $195.2m
- Propnex is trading at a 77% premium to APAC despite inferior fundamentals.
- APAC is trading at a 44% discount to Propnex despite superior fundamentals.
- The pair should trade at a closer valuation given no unique competitive advantages of either company.
- Either Propnex is overvalued or APAC is undervalued.
- Biased towards Pronex being overvalued.
- Catalysts will be 2Q & 3Q results, and end of Propnex’s moratorium in Jan 2019.