Bull, here's my take on MDF.
MDF is currently priced for the PSN business only which is assumed declining slowly. The reasonable value for MDF PSN business is $1.8 IMO though it is not easy to realize that $1.8 since they might not be able to sell HUM patient to other company (maybe they can sell the whole MDF company to some other company. or merge with other company)
So basically, MDF is currently priced with the expectation that the HMO division will fail. A couple months ago when the stock is at $2.5-$3 (also helped by the strong Q3 result), the market is pricing the HMO division $.70-$1.2 which is probably assuming the chance of HMO will be successful at 30-50% (these numebers are just my subjective projection).
As losses on HMO widens , and even wider than originally estimated by Management, the chance of HMO surviving gets reduced. and if not ebcuase of the PSN business subsidizing the HMO (and the ample $20M cash position), MDF will be in big trouble IMO. So in a way I'm glad that MDF didn't use the cash unwisely (even buyback aor pay dividend could be un-wise.)
In conclusion (IMO), the stock will settle at about $1.8 until there is any sign that the HMO can be breakeven and sustainable which the stock will then increase slowly (but it won't be $3+ anymore until there is huge certainty that the HMO business will be successful). If HMO losses widens again the stock will drop below $1.8. if they decide to close the HMO (while giving the assurance that the PSN business will still bring $12M cash flows each year), the stock will probably stay at $1.8 and we can expect some stock buyback or dividend (or buy some more clinic or members to increase cash flows and economies of scale). If HMO is successful,t he sky is the limit.. maybe they won't be as big as HUM (for sure) but $5 per share isn't going to be difficult to reach.. HUM actually did pretty well.. the alst 2 years also last 5 years.. I just take a look at MDF and HUM chart for the last 2 and 5 years, I can't believe HUM outperformed MDF big time...
Hope this answer your questions. They are all just my opinion and what would I do to the company depending what the HMO progress it.
And btw, I'm still holding this one till at least the end of the year (as I have mentioned for the last 2 years) before I make any further decision (unless their operating losses getting way out of hand before the end of the year).
Stanu78
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