petec Posted April 11, 2018 Posted April 11, 2018 It makes a lot of sense and I’ve been thinking the same. Unfortunately under MIFID2 in Europe ALL securities that pay out based on a reference value are termed PRIIPS and PRIIPS can only be sold in Europe if they come with a Key Information Document or KID. KIDs are 3 pages long and are so summarised as to be actively unhelpful but apparently we are all too stupid to read the real underlying documents. Anyway, obviously only European issuers give a fuck about it this and issue KIDs so the unintended consequence is Europeans can’t buy floating rate bonds or prefs issued outside Europe. (Or maybe it was an intended consequence - capital controls anyone?) And this comes in just when rates are rising and the only way to protect yourself is ... a floating rate bond! And while I’m on a roll, the final straw is that I’m British, and we are leaving the EU, so why are we implementing the damned regulation anyway? In case you can’t tell I’m bloody annoyed. I’ve emailed Dundee and asked them to consider preparing a KID. They are pretty basic and can refer to a prospectus so it would take about five minutes. Got no reply. (Atlantic Power replied and said no.) Grrr.
doc75 Posted April 13, 2018 Posted April 13, 2018 The new guy has said that 100 positions is way too many and wants to cleanup. If that happens then liquidity has to dramatically increase which should certainly alleviate fears around the preferreds. Makes any sense? Cardboard Agreed with most of your points, and I've been holding my nose and buying. Many of the 100+ holdings must be of very low value. I hope that they are aggressive with their clean-up process. I think market sentiment would improve dramatically if they were to cut their losses on some of the larger non-performing holdings. It's not like anyone is currently assessing these things at their carrying value anyway. So the writedowns wouldn't be a surprise, and the simplicity/transparency gained would be significant. The market is currently pricing this business to anticipate "more of the same". Any substantive action demonstrating that the new sheriff is optimistic and will run things differently would be very welcome. (Along these lines, I think management is being unnecessarily stubborn/noncommittal regarding repurchases and insider purchases.)
Cardboard Posted April 13, 2018 Posted April 13, 2018 "Along these lines, I think management is being unnecessarily stubborn/noncommittal regarding repurchases and insider purchases." Isn't this crazy to you that while they are a large holder (9.6 million shares or still worth $17 million) and their family is highly associated to this company, that it takes other people to tell them what to do or the obvious? And even then they refuse? I mean if the salaries were much larger than the stake I could see the incentives but, here? Cardboard
sculpin Posted April 13, 2018 Author Posted April 13, 2018 "Along these lines, I think management is being unnecessarily stubborn/noncommittal regarding repurchases and insider purchases." Isn't this crazy to you that while they are a large holder (9.6 million shares or still worth $17 million) and their family is highly associated to this company, that it takes other people to tell them what to do or the obvious? And even then they refuse? I mean if the salaries were much larger than the stake I could see the incentives but, here? Cardboard There is a reason I titled this thread "Dumbdee"...
doc75 Posted April 13, 2018 Posted April 13, 2018 There is a reason I titled this thread "Dumbdee"... Indeed. Although perhaps the title needs to be updated to reflect that it has moved from a "30% of NAV bargain?" to a "17% of NAV bargain?"!!
Cardboard Posted April 25, 2018 Posted April 25, 2018 I have been buying the preferreds "B". Amazing value and they would have to screw up in a crazy way to impair these. And even if partially impaired, they are at $11.40 vs par of $25... Cardboard
doc75 Posted April 25, 2018 Posted April 25, 2018 I have been buying the preferreds "B". Amazing value and they would have to screw up in a crazy way to impair these. And even if partially impaired, they are at $11.40 vs par of $25... Cardboard Ditto. And couldn't resist picking away at some common in the mid $1.70s.
Rod Posted April 25, 2018 Posted April 25, 2018 I’m split half and half between B prefs and common. I’ve been reinvesting the dividends from the prefs into common. I don’t average down—I set a position size at the beginning, so reinvesting divs is all I can do. Feels good to get a 12% yield then reinvest that in assets that seem to be worth at least double or triple the price I’m paying.
sculpin Posted April 30, 2018 Author Posted April 30, 2018 Dundee: An Under The Radar Holding Company Trading At A Significant Discount To Conservative NAV https://seekingalpha.com/article/4167479-dundee-radar-holding-company-trading-significant-discount-conservative-nav Summary Trades at a significant discount to conservative NAV of $4.41 per share, compared to stated NAV of $10.36. Dundee has a variety of levers to pull to realize value for shareholders; it continues to de-risk the portfolio and is reducing costs at the corporate level. The Goodman family has significant financial and reputational skin in the game and has never sold a share. Liquidity concern re preferred notes due 2019 is unwarranted as it has the option to pay cash, issue common shares or a combination of the two.
Foreign Tuffett Posted April 30, 2018 Posted April 30, 2018 A couple questions after 15 minutes of research: Aren't they liquidity-constrained? Based on the CC comments they have 60 million in cash needs this year. Next year they'll have to make a decision on how they want to redeem the (82 million par value?) preferred. The idea is that they will sell off assets to raise cash, thus closing the large market price-NAV spread right? Why haven't they been more aggressive in selling off assets to raise cash? Do they have any major subsidiaries that will likely be cash generative in the near future? Similarly, do they have any subsidiaries that are strong businesses?
sculpin Posted April 30, 2018 Author Posted April 30, 2018 A couple questions after 15 minutes of research: Aren't they liquidity-constrained? Based on the CC comments they have 60 million in cash needs this year. Next year they'll have to make a decision on how they want to redeem the (82 million par value?) preferred. The idea is that they will sell off assets to raise cash, thus closing the large market price-NAV spread right? Why haven't they been more aggressive in selling off assets to raise cash? Do they have any major subsidiaries that will likely be cash generative in the near future? Similarly, do they have any subsidiaries that are strong businesses? Well their position in Dundee precious metals is publicly traded and currently worth $118 million - this could be sold easily over the next year to raise money to redeem those preferreds.
SafetyinNumbers Posted May 1, 2018 Posted May 1, 2018 I think it’s important to note that holders chose to redeem less than allowed at previous redemption dates of DC.PR.E and that will likely be the case on June 30, 2019. Its possible, they will trade like DRM.PR.A which trade at a premium to par and are puttable at any time.
obtuse_investor Posted May 1, 2018 Posted May 1, 2018 I ran into a writeup about Dundee today from Roumell Asset Management, which is a value shop of the Ben Graham variety. http://www.roumellasset.com/pdf/update_1Q2018.pdf It includes a SOTP analysis and their conservative estimate of NAV comes to about $4.40/share. The writeup is on pages 5 and 6. Enjoy.
doc75 Posted May 1, 2018 Posted May 1, 2018 I ran into a writeup about Dundee today from Roumell Asset Management, which is a value shop of the Ben Graham variety. http://www.roumellasset.com/pdf/update_1Q2018.pdf It includes a SOTP analysis and their conservative estimate of NAV comes to about $4.40/share. The writeup is on pages 5 and 6. Enjoy. Just FYI the Seeking Alpha post above is from the same outfit. I really don't understand fears over the pref A redemption. There are plenty of levers to pull.
sculpin Posted May 1, 2018 Author Posted May 1, 2018 A couple questions after 15 minutes of research: Aren't they liquidity-constrained? Based on the CC comments they have 60 million in cash needs this year. Next year they'll have to make a decision on how they want to redeem the (82 million par value?) preferred. The idea is that they will sell off assets to raise cash, thus closing the large market price-NAV spread right? Why haven't they been more aggressive in selling off assets to raise cash? Do they have any major subsidiaries that will likely be cash generative in the near future? Similarly, do they have any subsidiaries that are strong businesses? Well their position in Dundee precious metals is publicly traded and currently worth $118 million - this could be sold easily over the next year to raise money to redeem those preferreds. Here is more on Dundee PM which is worth about $2 per DC.A share at the current price and about $3.25 per Dundee share at Paradigm's $5 target price.... In Summary.... Dundee Precious Metals: Hosted a lunch with DPM senior mgmt recently… in sum, it’s a cheap name that has deep value and a lot of growth within the next 12-18 months. • The Tsumeb smelter is operating efficiently – generated FCF for the first time of $7m in 2017 and CEO Rick Howes tells us we can expect $12-15m FCF going forward at Tsumeb • With both mines operational in 2019… AuEq >350koz @ $600oz AISC for the next 3 years…. • We expect DPM to generate $120m in FCF each year between 2019-2021 • Cheapest of the junior producers: o 0.49x p/nav, vs junior producer avg. of 0.91x. o 5.2x p/cf, vs junior producer avg. of 7.1x. Dundee Precious Metals Inc. RESEARCH NOTE | May 1, 2018 Don MacLean, Sr. Analyst | 416. 360.3459 |[email protected] Don Blyth, Analyst| 416.360.3461| [email protected] Lauren McConnell, Analyst | 416.366.7776 | [email protected] Open Path to Revaluation Investment Thesis. DPM has the potential to achieve a substantial rerating, based on strong growth over the next 1–2 years, but first it must prove it can operate its Tsumeb smelter profitably and secondly DPM, now with permitting and financing complete, it must build the Krumovgrad mine. We believe it can. Event We hosted a client lunch on April 24 with members of DPM’s senior management team (CEO, CFO, SVP Corporate Development and Investor Relations). While DPM has already experienced strong outperformance, up 19% in the last year, we believe a further 30–50% rerating is setting up to occur in 2018 as the Tsumeb Smelter continues to perform and remains cash flow positive, Chelopech remains a steady core performer and Krumovgrad moves toward first concentrate in late 2018, positioning DPM for a >100% increase in cash flow. Highlights Smelter Transitioning to Free Cash Flow | Five years of construction finally wound down in 2017 with an essentially new plant. Smelters require continuous operation and the on-and-off nature of tying in rebuilt parts of the project precluded this. The only continuous aspect was that the operating team constantly had to learn new features about the processes. Since Q1/17, Tsumeb has essentially been able to operate continuously, save the annual refractory relining (now every 14–15 months), showing that it is able to break even or better. Nameplate capacity is 240KTpa. It produced 220Kt in 2017 and is guided to 220–250KTpa in 2018, with upside to 265KTpa without further construction capital. Our C$7.27/sh NAV for DPM attaches zero value to the smelter (Figure 1), which we suspect other analysts do as well. Indeed, the market might assign a negative intrinsic value via a risk discount, given the long history of capital consumption ($50M acquisition plus $365M construction, plus sustaining capex). Our luncheon discussion confirmed that there are no longer obstacles to prevent Tsumeb from operating continuously, or extra capital items required that will prevent it from generating net free cash flow. If it can do so in 2018, together with the three-quarter stretch in 2017, we would expect the market to gradually lower its smelter risk discount. Construction of Krumovgrad on Time and Below Budget I As of March 31, Krumovgrad’s construction was 59% complete with $96.3M having been spent and a further $66–$72M to be spent over the next two quarters (total $162–$168M, budget $178M). Commissioning and start-up are expected in Q3/18 with first concentrate production in Q4/18 (targeted for November). Krumovgrad’s production is expected to average 103Koz/year for the first five years, increasing DPM’s gold production by an average of 60% and boosting our estimated cash flow by an average of 75% during that timeframe. Chelopech Continuing to Deliver I Chelopech has been DPM’s cash flow engine, and while grades have been declining to align with reserve grade, this has been offset by productivity improvements. The mine, now one of the most modern in the world, is positioned to deliver relatively steady grades and hence cash flow going forward. Until 2016, exploration at Chelopech had focused in-mine. DPM now has several targets that it is testing outside of the current mine area, but still very close to existing infrastructure. It has planned 15,000m this year, comprising 10,000m infilling existing holes at the Southeast Breccia Pipe Zone (SEBPZ) and 5,000m at the Krasta target (Figure 2). Underground drilling at SEBPZ in 2017 confirmed the potential for economically significant high-sulphidation style copper-gold mineralization over the 1,500m strike length. This year the focus will be to conduct systematic underground drilling to test the large areas between previous drilling. At the Krasta target, drilling only began in late 2017 with two surface diamond drill holes showing encouraging results with alternation and copper-gold mineralization similar to the Chelopech high-sulphidation style ore bodies. What’s Next for DPM? I A substantial valuation multiple lift (about one-third) typically comes with growing a company from a Junior to an Intermediate producer. For us, the threshold is +250–300Koz/year. We estimate that DPM will produce gold in concentrate of 263Koz and 305Koz in 2019 and 2020, respectively, and will generate net free cash flow of $75M and $150M. Once Krumovgrad is up and running in Q4/18, will it deploy this cash and, if so, how? Management feels that it should be deployed. An operating project would be ideal, otherwise a development/advanced exploration-stage project would make sense, particularly in Eastern Europe, where it has a solid track record and understanding. In our April 9 Gold Sector research note, we suggested that DPM and Nevsun Resources (NSU-T, C$5.20 TP, Buy) would be a good fit as Nevsun proceeds with its Timok project in Serbia, where DPM also has exploration/development projects (Lenovac, Timok and Tulare projects). Another possibility could be Sabina (SBB-T, C$3.25 TP, Speculative Buy), of which it currently holds ~10% of the shares outstanding. DPM acknowledged that it has always liked the project and the upside potential that Back River has (see our April 18 research note), but had always viewed SBB as too big. That might change in 2018–2019. Sabina’s market cap is $333M and the preproduction capex is $426M (our estimate), whereas DPM’s market cap is $453M. It would be a large bite, but one that could be considerably more doable with DPM’s US$75– US$150M/year of net free cash flow and if a rerating of DPM occurs. Valuation & Conclusion We think that DPM is positioned for a rerating among the Junior Producers in 2018. It is now finally able to offer more predictable performance and free cash flow from its existing operations, the smelter in particular, followed by strong growth starting in late 2018 from the new Krumovgrad mine. If investors can gain confidence that the smelter will be at least self-funding and Krumovgrad starts up without the problems experienced by most new projects these days, we think DPM could see a 30– 50% rerating, possibly more. It stands to reason that it will take multiple quarters before investors stop looking for the elephant in the room, but the upside is considerable and we believe it is achievable. DPM is trading at 0.45x NAV@5%, assuming spot gold of $1,315/oz and zero value for the smelter. Our Junior and Intermediate averages are 0.91x and 0.81x, respectively. We mention both tiers because with 2019–2021 production of 263–305Koz/year, plus copper, DPM will be on the 250– 300Koz/year threshold of our Intermediate category. With base metal and gold multiples now very similar, we like DPM’s blend of copper and gold. The smelting element might keep its valuation multiple below its gold peer average, but we still we see potential for a further 30–50%+ relative outperformance over the next year. DPM remains a Top Pick with a Buy rating and C$5.00 target.
doc75 Posted May 15, 2018 Posted May 15, 2018 Dundee's Q1 report was released this morning. More losses, yawn. NAV down to $10.06 from $10.36 at Dec 31. Some highlights: - Raised approx $43mm from asset sales, mostly publicly listed securities. Details weren't provided but it appears that they've sold off some (all?) of their shares in Osisko. No sales of Dundee Precious Metals or eCobalt Solutions. - They had $37mm cash at end of Q. - All of their subsidiaries experienced operating losses, except for Dundee Energy (small gain due to accounting gimmickry) and UHIC (revaluation of future royalties given higher oil price). - The Parq "ramp up" is not going as well as expected. They put another $17mm into the project. Refinancing unlikely to happen in Q2, probably Q3 or Q4. - Put another $7mm into Blue Goose, which had a $6.4mm operating loss. They were asked on the call if/when they would throw in the towel on some of these losers. No clear answer aside from saying the status quo is not an option. - They're "streamlining" GCIC and expect to move the bulk of the AUM to other platforms. Unclear what effect this will have on GCIC's numbers. - Only two analysts on the call. Very few probing questions.
sculpin Posted May 15, 2018 Author Posted May 15, 2018 GMP commentary.... Dundee Corporation BUY DC.A-TSX Last: C$1.89 May 14, 2018 ▼ Target: C$5.90 Q1/18 – Streamlining continues Undiscounted NAV $7.37 Dundee Corp. (DC.A-TSX) reported its Q1/18 results on May 14, 2018. Our NAV of $7.37 versus $8.00 previously was lower q/q largely due to losses recognized in its equity accounted investments and the continued underperformance of some of its investments. The discount to NAV is consistent at ~74%, largely unchanged q/q. Notable events Proceeds of $43.0 million was recognized from the sale of a basket of securities (Osisko Mining Inc. being one) – non-core to the business. A portion of the proceeds were invested in Parq Vancouver ($17.4 million). GCIC reported AUM of $210.8 million, an increase of $16.7 million, y/y. GCIC has indicated that during Q2/18, it will complete a streamlining of its private client line of business, following which ~$130 million in AUM will be transferred to other platforms. Relief efforts through government compensation has been sought with responses expected in Q2/18, for a wildfire that resulted in higher feed costs for Blue Goose. Parq guidance Parq Vancouver became fully operational in Jan/18. The initial ramp up of operations were slower than expected due to regulations and higher costs. However, Parq Vancouver is forecasting improved results in Q2/Q3 – in line with an improved outlook on the overall tourism industry in B.C. Funding of $33.4 million by two partners were invested into the project in order to meet certain obligations. Maintain BUY – Strategic review In our view, management has made some progress towards meeting key objectives. Management has created an industry-focused capital markets group with the hire of four seasoned professionals; subsidiaries will proceed with their streamlining activities to reduce annual corporate cash needs. Net cash at the corporate level was ~$37.2 million exiting the quarter. Our NAV is now $7.37 (previously $8.00). The discount to NAV remain largely consistent at ~74%. We apply a 20% discount to yield our target of $5.90 (previously $6.40). We maintain our BUY rating. See Figure 1 for our NAV sensitivity analysis.
doc75 Posted May 15, 2018 Posted May 15, 2018 Osisko released an underwhelming resource estimate for their Windfall deposit yesterday after market close. OSK shares are currently down 20%. I wonder what price Dundee got for their shares.
lessthaniv Posted May 15, 2018 Posted May 15, 2018 A 50% allocation of investment dollars between the commons and the preffered seems to make sense to me. Net dividends of 5.75%. The pref is acquired at <50% of par which hedges the capital invested into the common if you believe in the safety of the prefs. Limits the downsize exposure immensely but still gives significant exposure to the undervalued common. A textbook asymmetric bet. Value here is visible. Hence, I’ve joined the party.
Cardboard Posted May 15, 2018 Posted May 15, 2018 I am a little over 50% into the stock but, totally agree with you Lessthaniv. Let's hope that this Goodman or Jonathan finally wakes up sometime this summer when he is done with his portfolio review and does something constructive. Oh, and I had to hold myself yesterday not to call in and to tell Lucie to go FU in her retirement and hoping to never hear from her again! Cardboard
doc75 Posted May 15, 2018 Posted May 15, 2018 I am a little over 50% into the stock but, totally agree with you Lessthaniv. Let's hope that this Goodman or Jonathan finally wakes up sometime this summer when he is done with his portfolio review and does something constructive. Oh, and I had to hold myself yesterday not to call in and to tell Lucie to go FU in her retirement and hoping to never hear from her again! Cardboard Do you have something specific against Lucie? Just curious. I don't hold her responsible for bad investing decisions and I found her answers to questions were generally quite thorough and explanatory. But I haven't been following this company for years so don't know any of the history.
sculpin Posted May 15, 2018 Author Posted May 15, 2018 Recent review of the Marriott at Parq including many photos.... https://pointswise.ca/jw-marriott-parq-hotel-review-water-view-guest-room-vancouver-bc/
doc75 Posted May 30, 2018 Posted May 30, 2018 The B prefs are on sale again, trading with a yield over 12.5%.
Cardboard Posted May 30, 2018 Posted May 30, 2018 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
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