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

[sculpin]

And Parq opens next Friday...

http://parqvancouver.com/

 

GMP's take...

 

Parq Casino could be portfolio ace

 

In our view, DC.A’s medium term performance largely depends on three core

items: opening the Parq Casino, completing the sale of United Hydrocarbon

(UHIC) assets and managing liquidity at the corporate level. In this report, we

are taking a deeper dive into each of these three items.

 

Parq Casino set for fall 2017 open

 

The Parq Casino project in Vancouver remains on track for a fall 2017 open.

Management projects Parq may generate $75-$100 million annual EBITDA

with an estimated 12-month ramp up to full operations. We have performed

a sensitivity analysis for the project using the EBITDA range, possible debt

refinancing, and valuation multiples based on gaming peer comparables.

Although our range is wide, we calculate DC.A’s 40% equity stake in the

project may be worth ~$196 million at our midpoint assumptions. With ~$102

million carrying value, we see potential for a material win here, and the

addition of a lasting, cash generating property to the investment portfolio.

 

UHIC sale a positive outcome

 

DC.A recently announced the sale of UHIC assets (DC.A ownership 85%) to

Delonex Energy Ltd. for US$35 million cash on closing, US$50 million cash on

first oil, and a royalty stream. The deal is subject to a number of conditions

with uncertain timing including approval from the government of Chad. GMP

is advising UHIC on the transaction. We see this announcement as positive for

DC.A. Although our NAV was reduced, we believe the market may have been

assigning near nil value to UHIC. Closing the deal would remove monthly cash

requirements to maintain the property and add long run royalty potential. For

now, our NAV conservatively reflects only the initial payment on closing.

Maintain BUY – DREAM sale eases any liquidity concerns

 

We continue to pay close attention to DC.A’s liquidity position. On May 19th,

DC.A sold all remaining shares in DREAM Unlimited Corp. for net proceeds of

$106 million. We calculate this brings DC.A’s net cash position at the

corporate level to ~$57 million and offers management significant flexibility.

We anticipate selective cash injections into existing investments, with an eye

towards funding those most likely to reach profitability in the medium term.

Our updated NAV is now $9.79 (previously $9.77). We apply a 20% discount

to yield our price target of $8.00 (unchanged). We maintain our BUY rating.

 

[doc75]

I've been buying some more of the prefs (D series) over the past week as they were trading with a >10% current yield.  Anybody else?

[Rod]

And Parq opens next Friday...

http://parqvancouver.com/

 

GMP's take...

 

Parq Casino could be portfolio ace

 

Parq Casino set for fall 2017 open

 

The Parq Casino project in Vancouver remains on track for a fall 2017 open.

Management projects Parq may generate $75-$100 million annual EBITDA

with an estimated 12-month ramp up to full operations. We have performed

a sensitivity analysis for the project using the EBITDA range, possible debt

refinancing, and valuation multiples based on gaming peer comparables.

Although our range is wide, we calculate DC.A’s 40% equity stake in the

project may be worth ~$196 million at our midpoint assumptions. With ~$102

million carrying value, we see potential for a material win here, and the

addition of a lasting, cash generating property to the investment portfolio.

 

Thanks for this info sculpin. I like that GMP is using ~$200M for the Parq value. I had been optimistic it would be worth $120M.

[sculpin]

And Parq opens next Friday...

http://parqvancouver.com/

 

GMP's take...

 

Parq Casino could be portfolio ace

 

Parq Casino set for fall 2017 open

 

The Parq Casino project in Vancouver remains on track for a fall 2017 open.

Management projects Parq may generate $75-$100 million annual EBITDA

with an estimated 12-month ramp up to full operations. We have performed

a sensitivity analysis for the project using the EBITDA range, possible debt

refinancing, and valuation multiples based on gaming peer comparables.

Although our range is wide, we calculate DC.A’s 40% equity stake in the

project may be worth ~$196 million at our midpoint assumptions. With ~$102

million carrying value, we see potential for a material win here, and the

addition of a lasting, cash generating property to the investment portfolio.

 

Thanks for this info sculpin. I like that GMP is using ~$200M for the Parq value. I had been optimistic it would be worth $120M.

 

For an opening a week away looks like quite alot of outdoor work still going on. Hopefully they are ready to go on the 29th...

 

http://skyscraperpage.com/forum/showthread.php?t=213941&page=33

 

[Rod]

I've been buying some more of the prefs (D series) over the past week as they were trading with a >10% current yield.  Anybody else?

 

I haven't been buying any D's because I already have a ton. I think this one is a no-brainer. When you calculate the future yield based on the ability to convert into the B's in 2 years and likely interest rates increases, the number starts getting silly high.

[Cardboard]

I was surprised that the stock did not react more favourably following Q2 results as they had mentioned that the sale to Delonex could close in Q3 (market expectations were for end of year), liquidity risks were significantly reduced with the sale of their Dream Unlimited stake or no longer any bank debt, Blue Goose had turned profitable, HQ costs have been reduced significantly (Toronto office, less interest cost) and Parq Casino was on its way to open.

 

Technicals look really good right now and I would expect the company to start doing some financial engineering which should bring this thing to $4+ in no time.

 

Cardboard

[gokou3]

... I would expect the company to start doing some financial engineering which should bring this thing to $4+ in no time.

 

Cardboard

 

There are a few things they can do on this front in the near- and medium-term:

 

1) Refinance Parq loan at lower interest rate (I think they are paying 8%+ now in a USD construction loan; lucky for them that CAD is now strong)

2) Buy back the preferred at 10% after-tax yield.  These shares offer higher return than most of their investment ventures ;)

3) Further monetize non-core assets and buy back the common

 

OTOH, they would need to redeem 17% of the outstanding Series 5 preferred shares in January so that's a $15M outlay.  Given the net cash position they are in I am not worried about liquidity.

 

[doc75]

The Parq Casino opened this past Friday (Sept 29) at 11pm.  I've found surprisingly little media coverage of the event.  Plenty of coverage leading up to the opening, but very little after the fact. Just a handful of folks on Reddit making moderately negative statements  about the casino itself (poor layout, very small, no better than what it replaced, no buffet, ...) and some moderately positive comments about the food (biggest complaint: no buffet).  I guess Parq is only licensed for the same number of tables as the Edgewater Casino that they replaced. So perhaps they'll see how things go and push for more tables at some point in the future.  Still lots of construction going on in the outdoor spaces, and the hotels aren't even taking guests until end of October.

 

BUT:  The casino did indeed open, apparently without any huge issues.  I think this is solidly in the positive column for Dundee investors.

[Cardboard]

It is very positive indeed to have an opening on time and on budget. I am also fairly confident that the $75 to $100 million in EBITDA/year for Parq Casino is conservative or based on past run rate from Edgewater.

 

Despite its troubled past, this team seems to have done a lot of positive moves over the past year or two. I am a buyer.

 

Cardboard

[longlake95]

People are more bullish on the preferreds too. The Series III's have moved some 12% in a week.

[gokou3]

I am not a gambler but as a preferred shareholder did some "on ground research" last Saturday, i.e. the first weekend of grand opening.  I arrived there at about 9pm and the whole place was completely packed.  Let me be more specific: all the seats in the game tables and slot machines in the general area were completely occupied.  The high-limit slots / tables look pretty full too.  We tried to get into two restaurants and the wait time was each >30 min.  Minimum bet for Blackjack is $25.

 

The exterior of the complex is indeed not very "Vancouver-ish" - doesn't blend well into the surroundings and I can see why we see some negative online comments about that.  The inside is pretty decent.  Quite luxurious but not quite on par to the best Vegas casinos.  The number of slots / tables is limited to the same as what they had on the old Edgewater casino (btw does the DC.A joint venture own this extremely valuable piece of land?  Build a couple condo towers and it can easily be a half billion development).

 

Granted this was the first weekend so everyone wants to check out what's the deal, but it looks like the casino is off to a good start.

[Rod]

I am not a gambler but as a preferred shareholder did some "on ground research" last Saturday, i.e. the first weekend of grand opening.  I arrived there at about 9pm and the whole place was completely packed.  Let me be more specific: all the seats in the game tables and slot machines in the general area were completely occupied.  The high-limit slots / tables look pretty full too.  We tried to get into two restaurants and the wait time was each >30 min.  Minimum bet for Blackjack is $25.

 

The exterior of the complex is indeed not very "Vancouver-ish" - doesn't blend well into the surroundings and I can see why we see some negative online comments about that.  The inside is pretty decent.  Quite luxurious but not quite on par to the best Vegas casinos.  The number of slots / tables is limited to the same as what they had on the old Edgewater casino (btw does the DC.A joint venture own this extremely valuable piece of land?  Build a couple condo towers and it can easily be a half billion development).

 

Granted this was the first weekend so everyone wants to check out what's the deal, but it looks like the casino is off to a good start.

 

Found this online:

 

“April 2011, Vancouver city council agreed to relocation without expansion of the existing Paragon-owned Edgewater Casino licence. The 70-year, $6 million-a-year lease with B.C. Pavilion Corp. was renegotiated in 2013 to $3 million-a-year. Construction began in summer 2014. Under an accommodation side deal, Paragon will pay Musqueam Indian Band, instead of PavCo, $8.5 million of the first $9 million in lease payments. The project is a joint venture between Paragon, Dundee Corp. and PBC Real Estate Advisors.”

 

Is $3M per year a good deal?

[Cardboard]

Pretty cheap stock here with the family finally getting its act together. Many issues have been solved including the debt at HQ, lower costs, United Hydrocarbon deal closed and Parq operating.

 

Blue Goose/Tender Choice was a negative today but, at least they are moving quickly to fix it. I would say it is an improvement over previous behavior.

 

Cardboard

[longlake95]

I own the Pref's series III, as a chicken way to participate in DC. They are still waaay out of favour. But nice to see things improving...but slowly...might I add...

 

Where's Ned?

[doc75]

These guys have presided over some crazy capital destruction, but they also  aren't catching many breaks.

 

News out recently about a big fire at the Tender Choice plant in Burlington.  Apparently the building is pretty much destroyed.  (From what I've read. Not a first-hand account.)

 

It'll be interesting to see if there's a big rebound in the new year.  This is a really strong candidate for tax-loss selling.  I was surprised (on the downside) with the Q3 report and actually had orders in to sell at $3.15.

[Rod]

These guys have presided over some crazy capital destruction, but they also  aren't catching many breaks.

 

News out recently about a big fire at the Tender Choice plant in Burlington.  Apparently the building is pretty much destroyed.  (From what I've read. Not a first-hand account.)

 

It'll be interesting to see if there's a big rebound in the new year.  This is a really strong candidate for tax-loss selling.  I was surprised (on the downside) with the Q3 report and actually had orders in to sell at $3.15.

 

What specifically was the negative surprise you saw in the Q3 report?

[doc75]

These guys have presided over some crazy capital destruction, but they also  aren't catching many breaks.

 

News out recently about a big fire at the Tender Choice plant in Burlington.  Apparently the building is pretty much destroyed.  (From what I've read. Not a first-hand account.)

 

It'll be interesting to see if there's a big rebound in the new year.  This is a really strong candidate for tax-loss selling.  I was surprised (on the downside) with the Q3 report and actually had orders in to sell at $3.15.

 

What specifically was the negative surprise you saw in the Q3 report?

 

The continued poor performance of the operating subsidiaries, particularly Blue Goose.  I was (perhaps naively) expecting some stabilization there but Q3 was sour and Q4 looks like it will be uglier.

 

[sculpin]

In the grips of ferocious tax loss selling Dumbdee hits an all time low of sub $2.40 - this in striking contrast of DC's estimate of it's value per share of $11.79 in just the latest Q3 report. Yet the masterminds behind this destruction of corporate value and collapse of the share price refuse to buy back any shares to support their estimate of the lofty value of their corporation.

 

The gong show of the Blue Goose shut down of the Tender Choice plant in Q3 underlines the poor decision making and capital allocation still resident in Dundee Corp. Purchased only 1 year ago, the Tender Choice plant was deemed unfit to carry out its processing work and needed significant repairs and modifications. The Blue Goose President was forced to walk the plank. Then the plant burnt down....

TORONTO, ONTARIO--(Marketwired - Oct. 19, 2016) - Blue Goose Capital Corp. ("Blue Goose") ("the Company"), a privately-held, Canadian-based protein and organic food company which is a subsidiary of Dundee Corporation ("Dundee") (TSX:DC.A) today announced the acquisition of Tender Choice Foods Inc. ("Tender Choice"), a leading Burlington, Ontario based processing plant specializing in the processing, packing and distribution of meat products.

"Blue Goose is pleased to have Tender Choice as part of the Blue Goose group of companies," said Ben Nikolaevsky, President and CEO of Blue Goose, "With the acquisition of Tender Choice, Blue Goose has acquired a tremendous platform to build on the rapid growth of its poultry operations, and allows us to facilitate our growth in the industry."

At this stage it is apparent that Dundee Corp should be placed in liquidation mode over the next few years. No new investments. Sell all assets at the best available price but not in a fire sale. Cut all admin, management & Board costs to the bone to limit the cash drain. Start buying back the preferred shares at prices less than half of par to cut both the ultimate liability & save on the quarterly dividend drain.

 

Is this not the best way to save shareholder value??

[doc75]

At this stage it is apparent that Dundee Corp should be placed in liquidation mode over the next few years. No new investments. Sell all assets at the best available price but not in a fire sale. Cut all admin, management & Board costs to the bone to limit the cash drain. Start buying back the preferred shares at prices less than half of par to cut both the ultimate liability & save on the quarterly dividend drain.

 

Is this not the best way to save shareholder value??

 

Couldn't agree more.  But I think these guys have deluded themselves into believing they are astute investors (despite all evidence to the contrary), and of course they're getting paid a good salary to do play the game.

 

If they tried to put some of their assets up for sale, I think we'd see some pretty significant write-downs on their fair-value estimate. 

 

 

 

 

 

[SafetyinNumbers]

In the grips of ferocious tax loss selling Dumbdee hits an all time low of sub $2.40 - this in striking contrast of DC's estimate of it's value per share of $11.79 in just the latest Q3 report. Yet the masterminds behind this destruction of corporate value and collapse of the share price refuse to buy back any shares to support their estimate of the lofty value of their corporation.

 

The gong show of the Blue Goose shut down of the Tender Choice plant in Q3 underlines the poor decision making and capital allocation still resident in Dundee Corp. Purchased only 1 year ago, the Tender Choice plant was deemed unfit to carry out its processing work and needed significant repairs and modifications. The Blue Goose President was forced to walk the plank. Then the plant burnt down....

TORONTO, ONTARIO--(Marketwired - Oct. 19, 2016) - Blue Goose Capital Corp. ("Blue Goose") ("the Company"), a privately-held, Canadian-based protein and organic food company which is a subsidiary of Dundee Corporation ("Dundee") (TSX:DC.A) today announced the acquisition of Tender Choice Foods Inc. ("Tender Choice"), a leading Burlington, Ontario based processing plant specializing in the processing, packing and distribution of meat products.

"Blue Goose is pleased to have Tender Choice as part of the Blue Goose group of companies," said Ben Nikolaevsky, President and CEO of Blue Goose, "With the acquisition of Tender Choice, Blue Goose has acquired a tremendous platform to build on the rapid growth of its poultry operations, and allows us to facilitate our growth in the industry."

At this stage it is apparent that Dundee Corp should be placed in liquidation mode over the next few years. No new investments. Sell all assets at the best available price but not in a fire sale. Cut all admin, management & Board costs to the bone to limit the cash drain. Start buying back the preferred shares at prices less than half of par to cut both the ultimate liability & save on the quarterly dividend drain.

 

Is this not the best way to save shareholder value??

 

They can’t buyback shares because they need liquidity to pay down the preferreds that are puttable. You may not like it but there is logic to it. As a D class preferred holder, I appreciate that too.

[Rod]

I’m content to continue to hold the stock, both the common and the preferred (B shares). We should get a valuation on Parq Vancouver sometime in 2018. I’m optimistic that the value wil be $2+ per share. If that comes to pass it will be a game changer. With some more rationalization of the remaining holdings, I think we will have a solid NAV of $7 to $10 with the $2 from Parq. Much of that will be cash and near-cash. If the stock remains where it is now the oportunity to add value through share buy-backs will be immense. If the market is reluctant to reprice the stock, the buy-backs could go on indefinitely.

[sculpin]

In the grips of ferocious tax loss selling Dumbdee hits an all time low of sub $2.40 - this in striking contrast of DC's estimate of it's value per share of $11.79 in just the latest Q3 report. Yet the masterminds behind this destruction of corporate value and collapse of the share price refuse to buy back any shares to support their estimate of the lofty value of their corporation.

 

The gong show of the Blue Goose shut down of the Tender Choice plant in Q3 underlines the poor decision making and capital allocation still resident in Dundee Corp. Purchased only 1 year ago, the Tender Choice plant was deemed unfit to carry out its processing work and needed significant repairs and modifications. The Blue Goose President was forced to walk the plank. Then the plant burnt down....

TORONTO, ONTARIO--(Marketwired - Oct. 19, 2016) - Blue Goose Capital Corp. ("Blue Goose") ("the Company"), a privately-held, Canadian-based protein and organic food company which is a subsidiary of Dundee Corporation ("Dundee") (TSX:DC.A) today announced the acquisition of Tender Choice Foods Inc. ("Tender Choice"), a leading Burlington, Ontario based processing plant specializing in the processing, packing and distribution of meat products.

"Blue Goose is pleased to have Tender Choice as part of the Blue Goose group of companies," said Ben Nikolaevsky, President and CEO of Blue Goose, "With the acquisition of Tender Choice, Blue Goose has acquired a tremendous platform to build on the rapid growth of its poultry operations, and allows us to facilitate our growth in the industry."

At this stage it is apparent that Dundee Corp should be placed in liquidation mode over the next few years. No new investments. Sell all assets at the best available price but not in a fire sale. Cut all admin, management & Board costs to the bone to limit the cash drain. Start buying back the preferred shares at prices less than half of par to cut both the ultimate liability & save on the quarterly dividend drain.

 

Is this not the best way to save shareholder value??

 

They can’t buyback shares because they need liquidity to pay down the preferreds that are puttable. You may not like it but there is logic to it. As a D class preferred holder, I appreciate that too.

 

Ha! Yeah they're real short on cash or something that can be turned into cash to buyback the common shares. Sell off some of that consistently disappointing position in Dundee Precious Metals...

 

At the head office level, the corporation held cash of $53.0-million and a portfolio of publicly traded securities with a total value of $194.5-million at the end of the third quarter of 2017.

[SafetyinNumbers]

In the grips of ferocious tax loss selling Dumbdee hits an all time low of sub $2.40 - this in striking contrast of DC's estimate of it's value per share of $11.79 in just the latest Q3 report. Yet the masterminds behind this destruction of corporate value and collapse of the share price refuse to buy back any shares to support their estimate of the lofty value of their corporation.

 

The gong show of the Blue Goose shut down of the Tender Choice plant in Q3 underlines the poor decision making and capital allocation still resident in Dundee Corp. Purchased only 1 year ago, the Tender Choice plant was deemed unfit to carry out its processing work and needed significant repairs and modifications. The Blue Goose President was forced to walk the plank. Then the plant burnt down....

TORONTO, ONTARIO--(Marketwired - Oct. 19, 2016) - Blue Goose Capital Corp. ("Blue Goose") ("the Company"), a privately-held, Canadian-based protein and organic food company which is a subsidiary of Dundee Corporation ("Dundee") (TSX:DC.A) today announced the acquisition of Tender Choice Foods Inc. ("Tender Choice"), a leading Burlington, Ontario based processing plant specializing in the processing, packing and distribution of meat products.

"Blue Goose is pleased to have Tender Choice as part of the Blue Goose group of companies," said Ben Nikolaevsky, President and CEO of Blue Goose, "With the acquisition of Tender Choice, Blue Goose has acquired a tremendous platform to build on the rapid growth of its poultry operations, and allows us to facilitate our growth in the industry."

At this stage it is apparent that Dundee Corp should be placed in liquidation mode over the next few years. No new investments. Sell all assets at the best available price but not in a fire sale. Cut all admin, management & Board costs to the bone to limit the cash drain. Start buying back the preferred shares at prices less than half of par to cut both the ultimate liability & save on the quarterly dividend drain.

 

Is this not the best way to save shareholder value??

 

They can’t buyback shares because they need liquidity to pay down the preferreds that are puttable. You may not like it but there is logic to it. As a D class preferred holder, I appreciate that too.

 

Ha! Yeah they're real short on cash or something that can be turned into cash to buyback the common shares. Sell off some of that consistently disappointing position in Dundee Precious Metals...

 

At the head office level, the corporation held cash of $53.0-million and a portfolio of publicly traded securities with a total value of $194.5-million at the end of the third quarter of 2017.

 

All true, but they also have a ton of expenses to run the business annually so if you shrink the assets to much, the management expenses get too big as a percentage. I’m not saying it’s a good reason but it’s why they don’t buy back stock now when they did when the stock was 10x higher.

[doc75]

All true, but they also have a ton of expenses to run the business annually so if you shrink the assets to much, the management expenses get too big as a percentage. I’m not saying it’s a good reason but it’s why they don’t buy back stock now when they did when the stock was 10x higher.

 

There's probably too much margin of safety for them to invest in their own stock right now.  Makes them uncomfortable. 

 

In all seriousness:  I understand the need to maintain liquidity, but I'd like to see them put money into their own stock (or buying back prefs or whatever) rather than make new speculative investments.  Pare the operations back to focus only on rationalizing the existing portfolio.  Once the market starts giving them some credit, they can try to grow the company again. 

 

 

 

[SafetyinNumbers]

All true, but they also have a ton of expenses to run the business annually so if you shrink the assets to much, the management expenses get too big as a percentage. I’m not saying it’s a good reason but it’s why they don’t buy back stock now when they did when the stock was 10x higher.

 

There's probably too much margin of safety for them to invest in their own stock right now.  Makes them uncomfortable. 

 

In all seriousness:  I understand the need to maintain liquidity, but I'd like to see them put money into their own stock (or buying back prefs or whatever) rather than make new speculative investments.  Pare the operations back to focus only on rationalizing the existing portfolio.  Once the market starts giving them some credit, they can try to grow the company again.

 

But the liquidity is to redeem the E class preferred isn’t it which is like buying back preferred.