Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?

[sculpin]

That new CEO will finish his review of the portfolio this summer and then will take action...

 

Seriously, how much analysis do you need to figure out that buying your debt at 46 cents on the dollar is a good deal?

 

Cardboard

 

Or buying the common at like 25% of NAV is as well. Anyone know when Delonex begins to drill in Chad? Brent price back over $77 again - will be a very nice royalty at these prices....

 

Delonex paid US$35 million on the closing of the Transaction (subject to applicable escrow and holdback requirements), and will pay an additional US$50 million if first oil is achieved, including US$20 million for first oil at Doba and US$30 million for first oil at Block H. United will retain a royalty of 10 percent on Doba production and a 5 per cent royalty on Block H production, payable unless the average price of Brent Crude oil is less than US$45 for a quarter.

[doc75]

That new CEO will finish his review of the portfolio this summer and then will take action...

 

Seriously, how much analysis do you need to figure out that buying your debt at 46 cents on the dollar is a good deal?

 

Cardboard

 

I doubt they'd be able to scoop up much at these prices, due to limited volume etc.  But any amount would be accretive and would send a strong signal that they're not asleep at the wheel.

 

I'm anxiously waiting to see if they have any sensible ideas as to what to do with all the money-losing subs and private equity investments.  We're in a situation here where I think *any* positive development will precipitate meaningful upside in both the common and prefs.  And the bar for "positive" is pretty low.  I mean these guys can look good simply by selling some assets at a fraction of the carrying value.

[doc75]

Did someone say something naughty at the AGM on Monday or something?  Shares down to all time low of $1.65 today, and looking like they're heading lower under steady selling pressure.

 

Someone is making a half-assed attempt at a patient exit.

 

I see that over 12% the subordinate share votes were withheld across the board.  Not that it matters when the Goodman's shares count 100 votes per.

[SafetyinNumbers]

They were asked about buying back stock and they are reluctant while they are still trying to improve their liquidity position.

 

If someone was hoping that was a near term catalyst perhaps that would prompt an exit.

 

 

[Cardboard]

Jonathan is still not done with his portfolio review. That will be sometime late this summer. Until then, impossible to consider buying back debt for less than 50 cents on the dollar, nor shares at a fraction of NAV.  ::)

 

Dumbdee what the proper title for this thread. I really don't know how these childrens can possibly look at themselves in the mirror.

 

Cardboard

[SafetyinNumbers]

I pushed him on buying back the pref over the common primarily because it reduces future cash outflows and is effectively a risk free after tax return (to them) of over 12%.

 

The catalyst here could be whatever Delonex ends up reporting. That royalty could be a home run.

[Rod]

I pushed him on buying back the pref over the common primarily because it reduces future cash outflows and is effectively a risk free after tax return (to them) of over 12%.

 

The catalyst here could be whatever Delonex ends up reporting. That royalty could be a home run.

 

Parq Vancouver could be a big win as well. It's opening into one of the best hotel markets in North America. Commercial properties are selling for very high valuations. It's hard to believe that there aren't Chinese investors taking an interest in it. And, hopefully this isn't culturally insensitive, but a gold building in Vancouver with a large casino... Can you think of anything more appealing to Chinese investors?

[doc75]

I pushed him on buying back the pref over the common primarily because it reduces future cash outflows and is effectively a risk free after tax return (to them) of over 12%.

 

The catalyst here could be whatever Delonex ends up reporting. That royalty could be a home run.

 

Parq Vancouver could be a big win as well. It's opening into one of the best hotel markets in North America. Commercial properties are selling for very high valuations. It's hard to believe that there aren't Chinese investors taking an interest in it. And, hopefully this isn't culturally insensitive, but a gold building in Vancouver with a large casino... Can you think of anything more appealing to Chinese investors?

 

With regard to Parq, I was a bit surprised to read this in the annual letter:

 

"To date, results have been encouraging but more work needs to be done to reach our internal targets. And while the Casino is performing well, both hotels remain in ramp-up mode and results for the food and beverage options have been mixed. The Victor has proven to be premier destination for connoisseurs of steak and seafood, while other restaurants will require a repositioning to help ensure their competitive position."

 

All of my lame Google research led me to the conclusion that the casino was subpar (at least for experienced players, particularly with respect to poker) whereas the hotels were excellent.  And the restaurants seem to all have strong reviews, again based on minimal research.

 

They go on to say:

 

"Earlier this year, we provided guidance for EBITDA of between $50 and $75 million for Parq Vancouver in 2018. While we

still think this goal is reachable, it may take slightly longer than originally anticipated to achieve. Longer-term, once the project is fully ramped up, we anticipate that it has the potential to achieve annual EBITDA of greater than $70 million. However, we need to address the capital structure in order to ensure Parq Vancouver’s longer term viability. Currently, Dundee and its two equity partners in the project, PBC Group and Paragon Gaming, are exploring alternatives that could result in a debt refinancing or other changes to the capital or ownership struc- ture. While we have a favorable view of Parq Vancouver, and continue to believe in its potential as a cornerstone asset, ex- ploring various alternatives at this stage in its life is prudent."

 

All their recent language regarding Parq has been aimed at lowering any near-term expectations.  But it's now at the point where we don't need Parq to be a home run.  Any reasonable refinancing / restructuring of the project should allay concerns and be positive for Dundee shares.

 

[doc75]

I pushed him on buying back the pref over the common primarily because it reduces future cash outflows and is effectively a risk free after tax return (to them) of over 12%.

 

The catalyst here could be whatever Delonex ends up reporting. That royalty could be a home run.

 

Agreed on Delonex.  Apparently they expect a well to be drilled this calendar year, so a reasonably near term potential catalyst.

 

Do you mind sharing his response to being pushed on the prefs?  I understand the company not buying back the common at this point.  I don't understand insiders staying out of the market -- not even a nibble -- and I really don't understand why the company doesn't at least make an attempt at taking out some of those prefs.  Instead, they're talking about building out a merchant banking business.  Do they seriously think they can outlay capital in any manner that competes with the risk-free return they'd get from buying the prefs?

 

Of course there's very likely not enough liquidity for them to buy much anyway, and I don't know the costs of maintaining a buyback program. Maybe those are big factors. But my guess is that they overestimate their ability as investors/businessmen and are simply being irrational.

 

 

 

[Rod]

I pushed him on buying back the pref over the common primarily because it reduces future cash outflows and is effectively a risk free after tax return (to them) of over 12%.

 

The catalyst here could be whatever Delonex ends up reporting. That royalty could be a home run.

 

Agreed on Delonex.  Apparently they expect a well to be drilled this calendar year, so a reasonably near term potential catalyst.

 

Do you mind sharing his response to being pushed on the prefs?  I understand the company not buying back the common at this point.  I don't understand insiders staying out of the market -- not even a nibble -- and I really don't understand why the company doesn't at least make an attempt at taking out some of those prefs.  Instead, they're talking about building out a merchant banking business.  Do they seriously think they can outlay capital in any manner that competes with the risk-free return they'd get from buying the prefs?

 

Of course there's very likely not enough liquidity for them to buy much anyway, and I don't know the costs of maintaining a buyback program. Maybe those are big factors. But my guess is that they overestimate their ability as investors/businessmen and are simply being irrational.

 

I believe that Richard McIntyre exercised 45,000 rights in April. Unless I am misunderstanding this, that would represent a commitment of about $90,000

[obtuse_investor]

 

Of course there's very likely not enough liquidity for them to buy much anyway, and I don't know the costs of maintaining a buyback program. Maybe those are big factors. But my guess is that they overestimate their ability as investors/businessmen and are simply being irrational.

 

From what I have observed; Canadian listed entities with low liquidity end up doing a tender offer to draw out the impatient motivated sellers.

 

If the management offers low liquidity as the reason for the lack of buybacks, you can be sure they don't want to buy back shares. Where there is a will, there is a way. 

[SafetyinNumbers]

I pushed him on buying back the pref over the common primarily because it reduces future cash outflows and is effectively a risk free after tax return (to them) of over 12%.

 

The catalyst here could be whatever Delonex ends up reporting. That royalty could be a home run.

 

Agreed on Delonex.  Apparently they expect a well to be drilled this calendar year, so a reasonably near term potential catalyst.

 

Do you mind sharing his response to being pushed on the prefs?  I understand the company not buying back the common at this point.  I don't understand insiders staying out of the market -- not even a nibble -- and I really don't understand why the company doesn't at least make an attempt at taking out some of those prefs.  Instead, they're talking about building out a merchant banking business.  Do they seriously think they can outlay capital in any manner that competes with the risk-free return they'd get from buying the prefs?

 

Of course there's very likely not enough liquidity for them to buy much anyway, and I don't know the costs of maintaining a buyback program. Maybe those are big factors. But my guess is that they overestimate their ability as investors/businessmen and are simply being irrational.

 

The pushback was mainly that capital is finite and that they need the liquidity for paying off the DC.PR.E (which by the way shows no fear like the rest of the capital structure does) and running the business. I think they are just afraid of spending the capital on enhancing shareholder value in the short term and then having to do something dilutive later on.

 

He did say that he is considering buying some common and preferred personally but didn’t say what he was waiting for.

[Rod]

You can hear audio of the AGM at this link:

 

 

Commentary and Q/A begin at 10 minute mark.

[Sportgamma]

You can hear audio of the AGM at this link:

 

 

Commentary and Q/A begin at 10 minute mark.

 

The old guy at the meeting was pretty funny. 

[doc75]

You can hear audio of the AGM at this link:

 

 

Commentary and Q/A begin at 10 minute mark.

 

The old guy at the meeting was pretty funny.

 

Yeah that was something.  He's probably been on quite the return trip with his Dundee shares.

 

Volume has really picked up the past couple days in this $1.65-$1.70 range.  It'll take a while to clear a big holder who wants out.

 

[SafetyinNumbers]

 

Yeah that was something.  He's probably been on quite the return trip with his Dundee shares.

 

Volume has really picked up the past couple days in this $1.65-$1.70 range.  It'll take a while to clear a big holder who wants out.

 

Probably the guy who asked about the share buyback.

[petec]

DC.PR.E (which by the way shows no fear like the rest of the capital structure does).

 

That's because they're puttable, which in effect means they rank senior to the other prefs. The YTM would be sky high if they traded much below par!

 

Interestingly they are also convertible at the company's option into common at the current price, which enhances the value of the other prefs IMHO and is potentially very dilutive to the common given the current market cap.

[Rod]

DC.PR.E (which by the way shows no fear like the rest of the capital structure does).

 

That's because they're puttable, which in effect means they rank senior to the other prefs. The YTM would be sky high if they traded much below par!

 

Interestingly they are also convertible at the company's option into common at the current price, which enhances the value of the other prefs IMHO and is potentially very dilutive to the common given the current market cap.

 

Actually the E shares are convertible into common at the current price or $2, whichever is greater. You might think the E holders would be a little worried about that with the common currently below $2.

[petec]

Does anyone know much about TauRx? I am struck by the carrying valuation - both in that it is significant, suggesting real value is present (despite poor trials results) and in that it is discounted by 50%, suggesting rapid potential upside if the discount is removed.

 

Could be a zero, could be a hero, and I have no idea which. Does anyone?

[doc75]

DC.PR.E (which by the way shows no fear like the rest of the capital structure does).

 

That's because they're puttable, which in effect means they rank senior to the other prefs. The YTM would be sky high if they traded much below par!

 

Interestingly they are also convertible at the company's option into common at the current price, which enhances the value of the other prefs IMHO and is potentially very dilutive to the common given the current market cap.

 

Actually the E shares are convertible into common at the current price or $2, whichever is greater. You might think the E holders would be a little worried about that with the common currently below $2.

 

Given that they're sitting on a bunch of liquid investments, I find it hard to believe that they'd dilute their own holdings in the common to pay off the E's.    I'm sure they don't want to sell off much DPM, but if it's a choice between that and diluting the hell out themselves, I think they would sell. 

 

I haven't read the E prospectus lately: can they do a hybrid thing, part cash part equity?

 

[petec]

DC.PR.E (which by the way shows no fear like the rest of the capital structure does).

 

That's because they're puttable, which in effect means they rank senior to the other prefs. The YTM would be sky high if they traded much below par!

 

Interestingly they are also convertible at the company's option into common at the current price, which enhances the value of the other prefs IMHO and is potentially very dilutive to the common given the current market cap.

 

Actually the E shares are convertible into common at the current price or $2, whichever is greater. You might think the E holders would be a little worried about that with the common currently below $2.

 

Given that they're sitting on a bunch of liquid investments, I find it hard to believe that they'd dilute their own holdings in the common to pay off the E's.    I'm sure they don't want to sell off much DPM, but if it's a choice between that and diluting the hell out themselves, I think they would sell. 

 

I haven't read the E prospectus lately: can they do a hybrid thing, part cash part equity?

 

I can't remember but that's effective what they did with the D's I think, so where there's a will there's a way.

 

This may link into the buyback discussion in that they won't want to use any liquidity on un-necessary buybacks until the dilution risk is gone.

[doc75]

Does anyone know much about TauRx? I am struck by the carrying valuation - both in that it is significant, suggesting real value is present (despite poor trials results) and in that it is discounted by 50%, suggesting rapid potential upside if the discount is removed.

 

Could be a zero, could be a hero, and I have no idea which. Does anyone?

 

I did a reasonably deep dive into this a while back.  My conclusion was that it should be conservatively treated as a 0.

 

They did some a questionable post-hoc statistical analysis on their last (failed) trial data, and are moving toward a new trial on that basis.  Outside experts are extremely skeptical -- with the analysis of the failed trial, and with the biochemistry of the drug itself (which is a derivative of the commonly used stain methylene blue).

 

Here's an old post.  You can find plenty more recent ones via the Google:

 

https://www.alzforum.org/news/conference-coverage/first-phase-3-trial-tau-drug-lmtm-did-not-work-period

 

I hope Dundee manages to sell off their stake so there is some fractional recovery.  But at this point I don't even know what they could get for it, so it may just linger there until a seemingly inevitable write-off.  As Jon Goodman said at the AGM:  There's a difference between book value and what we could actually sell these things for (paraphrased).

 

[sculpin]

Does anyone know much about TauRx? I am struck by the carrying valuation - both in that it is significant, suggesting real value is present (despite poor trials results) and in that it is discounted by 50%, suggesting rapid potential upside if the discount is removed.

 

Could be a zero, could be a hero, and I have no idea which. Does anyone?

 

Casino-Backed Startup Eyes Alzheimer's Cure Worth $2.5 Billion

 

By Joyce Koh  and Livia Yap

March 1, 2018 at 8:24:41 PM EST

 

TauRx will look at options including IPO if trial successful

Big pharmaceutical companies have exited or failed in field

 

It hasn’t found a cure for Alzheimer’s disease and doesn’t have any drugs on the market. Yet, TauRx Pharmaceuticals Ltd. says the company’s worth about $2.5 billion as it embarks on its latest trial funded by shareholders including casino operator Genting Bhd.

 

If the trial proves successful, the Singapore-based company plans to apply to European and U.S. regulators for conditional or accelerated approval of its drug, TauRx Deputy Chairman Tay Siew Choon said in an interview in the city-state last month. It will also need to raise about $150 million to conduct a more comprehensive phase III trial, though at that point, it would evaluate options including an initial public offering or sale.

 

TauRx is pressing ahead in a field that has seen many of the largest pharmaceutical players from Pfizer Inc. to Axovant Sciences Ltd. exit or fail. Just last month, Merck & Co. said it will end a trial of its most advanced Alzheimer’s drug while Biogen Inc.’s shares tumbled after saying it was making changes to its trial. TauRx disappointed investors in 2016 when it said its LMTX drug failed to meet a primary goal of slowing the rate of disease progression when taken in combination with other Alzheimer’s drugs.

 

“We have consistently seen that our theory works, and there’s no reason to give it up,” said Tay. “Shareholders’ support and faith in us has not weakened.”

 

On top of a $71 million rights issue in October to fund the current trial, TauRx had already raised more than $500 million since 2002, according to Tay. The last financing round in 2016 valued the company at about $2.5 billion, he said. Billionaire Lim Kok Thay’s Genting invested $112 million in TauRx in 2012, becoming its biggest shareholder with about a 20 percent stake.

 

TauRx has been recruiting patients since November for the current trial, where it plans to test its drug on 200 patients with mild Alzheimer’s disease who aren’t taking any other medication. The results are expected in early 2019.

 

https://www.bloomberg.com/news/articles/2018-03-02/casino-backed-startup-eyeing-alzheimer-s-cure-worth-2-5-billion

[bizaro86]

How venal are these guys? From the perspective of the common/remaining prefs it seems like the best option would be to cash out the shares with equity at $2, given that equity is grading at $1.69. That much dilution would tank the stock, so you could probably do a tender and get most/all the shares back for $1 to $1.50, which is potentially pretty accretive.

[petec]

How venal are these guys? From the perspective of the common/remaining prefs it seems like the best option would be to cash out the shares with equity at $2, given that equity is grading at $1.69. That much dilution would tank the stock, so you could probably do a tender and get most/all the shares back for $1 to $1.50, which is potentially pretty accretive.

 

It might not tank the stock. All the liquidity issues and some of the leverage would go away, and I suspect there is also a dilution discount in the price now which would also go; plus you'd still only end up at about 0.3x book!