Maybe they are in talks with South Canterbury Finance :P
Maybe they are in talks with South Canterbury Finance :P
That would be very unfunny. Even the Government isn't prepared to save the South Canterbury Finance mess!
Good start to trading post the moratorium ending and share issue. Last sale at 11c and buyer at 12c. Early days though.
That post moratorium trading has suprised me somewhat. I mean the chance to buy extra shares at 10 cents with attached options.... why buy them now for 12 without getting the options?
I feel a little sorry for the likes of Hotch and Watson (and by inference Hangover investors) .... if the GFC had happened a year earlier they could have had the benefit of the government guarantee as well and made hay for another few years .... just like SCF has been going for a year or two longer than they deserved
So it is all a matter of timing eh
The Annual Meeting notice arrived in my mail box on the weekend.
One of the subjects to vote on is the CEO's new pay. You have to be joking I thought,but no there it was cmplete with a justification from Campbell McPherson.
Paul Byrnes record.
A director who appointed Andrew Walker as CEO. Walker then did the best deal he had ever done. Buy into St Laurence for $30 million,subsequently written down to zero.
Took 12 months to sell Equity Investment Advisers during which time it lost value. Then sold it to the ex MD of Dorchester who he accused of shonky business practices.
When recommended that the company diverse away from finance activities five years ago,and invest in gold related funds, said"that smacks of Goldcorp to me, and then spent $30 mill in St Laurence. Gold at the time was trading at $400 an ounce.
Has taken DPC shares from over $2 to 12 cents,
In my opinion he pays no heed to the pain that shareholders and debenture holders have suffered, and the company should introduce performance based pay.
The vote will be passed because of the two majority shareholders.
LEW
Are the two biggest holders happy with this? Surely they have some influence... I know the business bakery wont be wearing a loss but Hugh Green certainly will be...
Any take on the half year trading result.... a small loss I see but smaller than expected... the restructuring has certainly seemed to help.... is there a future?
My thoughts are that at this point, they are probably worth about 85% of their net shareholders equity value ($27m). I say this on the basis that their asset base/product sales are not yet really of a scale to generate ongoing cashflow beyond expenses, so they are basically the sum of their financial resources with a discount for implementation risk. Works out at around 13cps.
Some more random comments:
- Where are the financial resources going to come from to increase lending? I am not clear on this point.
- If they are simply transferring cash from discontinued operations (RAM's, Senate) to lending, then how will they increase earnings sufficiently to achieve the 3 yr target of $4m profit?
- The size of funds under management (shown on their web-site) is tiny and difficult to see where they could offer an advantage at this point.
- Likewise, the life insurance business. In fact, all their businesses are currently so "niche" that it is difficult to see what they can do better than larger players.
- They have a three year horizon to repay the 5% notes ($17m), so would presumably need some other significant source of funds by then (e.g. bank facility). Although it's probably manageable, it is still a potentially costly hurdle to leap at some point.
- Although their half year result is ahead of budget, it was indicated at the agm that this was more due to lower costs than to higher sales.
Overall, I think they may well be a good investment at some point, but I am just going to leave on watch for now as think they could need another 2-3 years of consolidation and groundwork before they are ready for real growth. A break-even forecast for next year suggests there is probably a bit of time before they are going to look obviously "cheap".
Make that 12.5 cent options... that gets them very close if not over the 17 million needed to repay the notes.... and if profit is 4 million come 2012 then the shares should be trading over 12.5 cents. Not a bad strategy all up.
Maybe you are right there blackcap... but what % of the options are with the former debenture holders (who also hold the notes?). I wouldn't think there would be a high exercise rate from them, and many would not hold a marketable parcel.
Also, conversion of the options is effectively built in future dilution on that basis, so would want to allow for that in valuation - i.e. limits upside to shares until exercised or expired.
I am aware of the upside ceiling as it were... but with a $4 million dollar profit even double the number of shares on issue it should still provide for a shareprice in excess of 12.5 cents...and options are also saleable on market... yes they may have a small problem with the exercise thereof, but most option holders are shareholders and not debenture holders.... shareholders in the recent restructuring got options als the Business Bakery and Hugh Green.... I presume they would take them up.... $17 million in the bank.
Hi blackcap,
I have just discovered the answers to my questions are all in the june prospectus with 5 year forward projections for balance sheet and cashflow we can compare against. Haven't seen a company brave enough to do that for a while - but will definitely be a good document to track performance against! :)
Looks like they are planning to get the majority growth through lending, funded by bank loans of $17m in 2012 and $10m in 2013, plus some growth in insurance income.
Biggest issue so far is that op cashflow is running well off the pace to make the 2011 target, so could throw a spanner in the works, but could be a simple timing issue at this stage.
On valuation side, presuming that they achieve all their 5 year projections exactly and make NPAT of $7.8m in year to Mar 2015, then assign market P/E of 10 and expect market cap at end of May 2015 to be $78m. Discount back at 25% pa for 4.5 yrs (based on that being the minimum I would want to bother investing in their shares for) and divide by the number of shares they predict at that time (253m), then would rate as buy up to 11.3cps at this point. Though if they can get through to 2015 and achieve all their targets, then perhaps a P/E of 14 will be fair by then (16cps equiv)?
Hi Lizard,
Good investigating there. Your synopsis is pretty much spot on. Pe of 14 would be very fair if they meet targets. That said they are already running ahead of target according to their latest announcement which if anything is good for shareholders but also bond holders. Definately see a wealth transfer from Debenture holders to shareholders through the restructuring but then again it was probably a win win situation. A liquidation would mean less for both. A nice plan whoever ultimately came up with it for both sets of stakeholders. A NPAT of 7.8mill with 253 million shares on issue wouldnt that imply a shareprice of 40 cents with a PE of 14 rather than your figure of 16cents? Or have you discounted the 40 cents back into a PV?
Yes, as per above, have discounted over 4.5 years at 25%pa - which is the minimum I'd want to plan on getting back for something of this nature.
I think it is fairly early days as far as seeing how they are going against plan since plan was produced nearly half way through period when they had good visibility. The revenues are about on track for 50% of their 2011, but op cashflow is not - and they will be reliant on that cashflow for reinvestment if they are going to grow the loan book without resorting to other funding options (beyond the bank loans already allowed for). Link to companies office doc for the prospectus here if anyone wants to refer.
Hi Liz
Your sights may be too high with the P/E estimates ...historically DPC traded under 10 ....from memory about 8.
Most of the old NZ finance company sector shares use to trade with low P/E & low NTA/share ...the low P/E back in those days use to even out the low NTA /share in evaluating risk v reward investing. DPC was the oddball back then having a much higher NTA/share than its peers.
Edit; ...Its interesting to see these posts.....as I have too been recently eyeing DPC and saying Hmmmmm:mellow:
Liz and Hoop, cheers for succinct comments. I agree with Hoop that a lower PE of 10 is probably more realistic in the environment which they have traditionally traded. That said, this company still has the suprise element of the Business Bakery and what they want to achieve with it... That for me makes it an interesting prospect in these early day ;)
well well some action today.. bought up to 15 cents and well bid at 12.5... the magical lets or lets not exercise our options. Although quite a bit of time to go. Certainly more support now than the last 6 months or so.
Sorry, revised post...
... seems a bit insulting to be offering to buy back the DPC010's at 55cpu off the former debenture holders who received them at face value $1 in August.
From what I can see, they may be illiquid, but the on market trades have been closer to last trade at approx 73.5cpu. Given (I think) the DPC010 will now represent about 12% of original debenture holding, they are basically offering the former debenture holders another 6 cents in the $ haircut.
If they couldn't offer 90%+ of face value, then better they did nothing than to add insult to injury.
To be fair though, the announcement makes it clear that they are targeting people who may not necessarily want to hold the notes and are happy to walk away with the loss. Nobody has an obligation to take up the offer and, as they state, "we have an obligation to use funds in the best interests of all Dorchester shareholders".
I agree with Felix here, I have a 200 odd holding. Now I cant really go and sell that on market can I and I may not want to wait for 3 years. In essence very smart of DPC to be doing this...If they can get 5 million, they are effectively adding about 4 million to the bottom line..... very clever.
But Lizard, some debenture holders may feel it is adding insult to injury... they dont have to take up the offer though. I will be interested to see how many take it up.
Announced yesterday, 1.8million of the Notes bought back. Very good for DPC to pick up this much... adds to the bottom line.
I didn't see an interest rate indicated for the notes - did you? Provided they are at reasonable rates, it seems like the sensible thing to do. As far as former debenture holders are concerned, I don't see this as too much of an issue given that the shares are to be issued at 10cps and option conversion adjusted to match. Not ideal, but at least enables DPC to continue on their planned growth path and easy to see why the banks don't want to help with funding facility.
Pretty significant overhang though, so it's going to keep the shares from being terribly interesting for a while.
Just having a close look at DPC - I'm thinking it would be crazy to buy the heads at current prices if you weren't prepared to buy the notes...DPC010.
A rise of 25% in the shares gives you 10cps and brings into play conversion of the notes and the options - and massive dilution, which probably makes it unlikely. However, it also means they would have enough funds to repay the notes in full - though, at the moment, they are repurchasing as many as they think they can afford at 70 cents in the $.
Just noticed that the Convertible notes given to shareholders not only pay better interest (8.95% +) but are first-ranking and therefore ahead of the DPC010 if I am reading aright. Given the chances of them finding $18m in time to repay the noteholders in mid-2013, this may not be the last possible dilution for shareholders. Options converting at 10cps would be a good outcome... but looks unlikely unless they have a March hare in next years hat. Not sure there are any "good" investments in DPC, but the DPC010's would surely have to be preferable to the shares...
I see DPC are trying to buy back the DPC010 at 92cpn and are asking noteholders to approve this on a 75% vote rather than making the offer to all holders. To support this, they have come up with a report suggesting that 92cps is at the top end of the valuation range, and implies a 15% yield. This seems an odd conclusion to me. The notes are due for repayment at $1 each in mid 2013 and pay 5% pa which, although low, is still an improvement on most one year rates at present. Given DPC seem to be able to find the funds to pay at least 92% of the notes back right now, then why should the valuation be pricing in much of a default risk at this point? Sure, I would question where DPC have got the funds to repay, but it does seem like they are once again treating their long-suffering former debenture holders with contempt. I know they can still point to having provided better returns than many other debenture providers, including the likes of the larger Hanover and Strategic, but I'm not sure that being "less bad" is a virtue.
No doubt the report will convince noteholders to vote it through - no surprises that they got the report from some outfit I've never heard of before... it will, however, take many years before my distaste for DPC passes.
Lizard This cat will vote no. I might say yes at $1.00 as this includes this quarters Interest & possibly longer depending on how many meetings they need & date of settlement. I think they will struggle to make the proposed settlement date.
I am also DPC010 holder and at this stage intend to vote against the compulsory purchase @ 92c times number of notes remaining 14.961m = $13.76m. If they can raise $13.76m then surely @ $1.00 the cost would be $14.961m and probably able to raise that also , dif of $1.12m. I guessing they want to book a nice gain of $1.12m in the accounts. By the sounds of things the first meeting will not get the required numbers and hence the second meeting will be the one that determines if they get the green light. If the notes are holding up DPC on a number of fronts and hence the need to repurchase early will allow them to act, then $1 got to be the price.
May I ask how many notes both you people have "Possum the Cat & Lizard"?. I can muster about 270,000 and I'm guessing most small holders won't vote.
I hardly have any. About 1600. Have sent off my "no" vote.
Romulus hold just over 1000 notes. Planning on going to the meeting. Surely they would be better to save the cost of the meeting & wait 6 months. The venue is one of the most expensive in Auckland
I won't be able to attend and I doubt that many will. Thankyou for the numbers as it gives me an idea on the number who are likely to vote ( I guessing very low number since many large holders are Korean and probably too difficult to attend). The "NO" vote I suspect will count.
Regards
Lizard & Romulus The idiots voted yes about 79% of those that voted & they did get a Quorum so all done & dusted. A lot thought that if they voted no they would end up getting nothing.
Interesting deal. I'm not sure the stock is good value, but they're doing an excellent recovery job.
I agree the company has done really well coming back from the brink of oblivion. When you think of how many finance companies went to the wall you have to say the Dorchester management has done a great job.
I'm not sure you can measure how good the deal is until the company provides further information about the purchase terms. We know that 60% of the purchase consideration is in cash and 40% in Dorchester shares but we don't know how the cash component is being funded, what level of interest they will be charged and the repayment terms for the funding, the price of the shares that will be issued (i.e. how much the deal dilutes existing shareholders) and the terms of the earn-out arrangement.
Haha now the statement is that "the Dorchester Group could potentially achieve a net profit after tax of $4m - $5m in the next full financial year". Slapping 'could' and 'potentially' together means it's a wish. Heck I 'could potentially' win Lotto this weekend.
Also the PE might look like 9 at the current price but there are some shares to be issued and some debts to be rung up before the purchase is settled and that's got to have some impact (there is still no mention of how the cash component is being funded, what level of interest they will be charged, the debt repayment terms, the price of the shares that will be issued and the terms of the earn-out arrangement).
Good luck to the company and holders though. The company is turning itself around very nicely so hopefully this is the start of something good.
Still climbing .... no body wants to sell. lol
Can someone enlighten me why this stock is rising? Felix highlighted the "in the money" options outstanding at 10c. Is it the Geoff Ross/Bakery factor?
There are currently 208m shares on issue. The 12.5c options are well in the money now so you'd be a mug to not convert the options to shares in May 2013. There are 150m options outstanding so that takes you up to 358m shares on issue (acknowledging of course that people converting the options to shares will generate some cash for DPC of course).
Then there is the potential issue for shares for the potential 'earn-out' for the purchase of EC Credit Control, with some of this being in shares. There is no indication of how many more shares will be issued for the earn-out so let's be conservative and assume 12m more shares issue to take the total issued shares up to 370m. With a current share price of 26c that represents a market cap of $96m. The company is forecasting an after tax profit of $4m-$5m for 2013/14 so that puts the company on a potential PE of 19 (taking the best case scenario of $5m profit).
There are lots of positives about the company. They have sorted out their financial position, they will have cash flowing in when the options are converted, they are in position to take a leading role in the finance sector consolidation and they appear to have good leaders. I do wonder if the share price has gotten ahead of itself but I'm pleased for the company and for shareholder who have stuck it out over a few tough 4-5 years.
This stockwillbe a stand out performer for 2013.
Their purchase of East Coast Credit control is a game changer.
Can anyone tell me if the DFC options at 25c are value?
DORCHESTER ACQUIRES STRATEGIC STAKE IN TURNERS AUCTIONS
Dorchester Pacific Limited (NZX: DPC) today announced it has entered into an
unconditional sale and purchase agreement to acquire the 18.2% shareholding
in Turners Auctions Limited (NZX: TUA), currently held by interests
associated with Milford Asset Management.
The cash consideration is $9.07 million or $1.82 per share (ex dividend). A
deposit of 5 cents per share has been paid on the execution of the agreement,
with the balance of $1.77 per share payable on 20 June 2013.
Dorchester CEO, and Executive Director Paul Byrnes, said the Turners Auctions
Board had indicated he would be welcomed on to the Board.
"There is a natural alignment between Dorchester and Turners Auctions," said
Mr Byrnes.
"Clearly finance and insurance of motor vehicles
are key drivers for Turners.
Both are areas we can add considerable value to as more than 65% of
Dorchester's new lending is for private and commercial motor vehicles.
And our recently released Mainstream Insurance focuses on motor vehicle
related insurance products to the consumer market.
"Of course, we appreciate any involvement as a provider of finance and
insurance services has to make sense for all Turners Auctions shareholders.
We look forward to working with the Turner's Board and management to achieve
positive initiatives to that end," he said.
"We are also supportive of Turners Auctions' initiative of increasing local
vehicle sourcing through its 'Cash Now' product, and IT initiatives -
including the imminent deployment of a new website."
Dorchester Chairman, Grant Baker, said the investment supported its strategy
to develop an end-to-end finance business.
"It allows us to participate in the origination or 'front-end' of the market.
"This complements our acquisition of
EC Credit Control - a leading supplier
of credit control and debt recovery services - in October last year, which
gives us a profitable position at the back-end of the market.
"We are also continuing to evaluate further acquisition opportunities that
may broaden our financial services offering," Mr Baker said.
ENDS.
One more under the belt.:t_up:
It appears that things are on the up DPC. Their recovery is going well and long may it continue. This 20%... shareholding in TUA is I feel a good example of the way forward for DPC
Profit forecast up a little more.
Share price up a lot more. :)
Divi flagged Dec 2013 and July 2014 - thats got to be good for the sp and the company. Keep on rockin and rollin
People waking up to the options now ... dpcoa, I was picking them up for 10c ea. a few weeks ago.
OPTIONS Need to exercised by end of Month
So have I got this right, with the excercise of options and convertible notes- 150,000,000 and 110,000,000 respectively with the additional shares issued of 30,000,000 being contained in the 150,000,000 mil figure.
Does this then equate to a maximum of 468,263,598 shares on issue after all excercised?
So this is going to make the price of the placement shares really interesting!
DORCHESTER YEAR END AHEAD OF FORECAST
Dorchester Pacific Limited (DPC) today posted its full year results for the financial year to 31 March 2013, reporting a Net Profit after Tax of $1.71 million (2012 - $1.60 million loss).
The result is ahead of the earlier profit guidance of $1.60 million.
The result includes part year trading of EC Credit, the debt recovery business acquired in November 2012, a take-up of due diligence and transaction costs relating to the acquisition, the write-off of costs relating to the early surrender of level 9 at the company's Shortland Street, Auckland premises and a partial write-back of pre-paid tax.
The balance sheet shows shareholder funds of $33.2 million (2012 - $24.2 million). Net tangible assets per share are $0.02 (2012 - $0.12) and net asset backing per share $0.16 (2012 - $0.14).
The results to 31 March 2013 have been audited by Staples Rodway. They expect to give an unmodified opinion on the financial statements.
CEO and Executive Director Paul Byrnes commented: "The result reflects profitable and improving trading performance from the finance and insurance businesses and a part year contribution from EC Credit which is also trading ahead of forecast. All legacy costs and costs of restructuring the group have been taken up. Overheads and operating costs are well under control and aligned to the level of business activity and planned growth."
Commenting on the trading subsidiaries, Mr Byrnes noted;
"The quality build of the receivables book of Dorchester Finance continues. Return and arrears metrics on new lending continue to track ahead of budget. The legacy Senate motor vehicle book is fully provided for. We continue to invest in IT and work on more efficient processing of loan applications.
The DPL Insurance business also traded ahead of budget and ahead of last year. The private motor vehicle insurance product has just been released completing the suite of new consumer insurance products under the 'Mainstream' brand. Market support and distribution are increasing. The business is meeting the timetable to achieve a full insurance licence under the new legislation administered by the Reserve Bank of New Zealand.
As reported in March, the management, governance and operational functions of newly acquired EC Credit have settled in particularly well. Two major contracts negotiated with New Zealand institutional clients last year have now been executed and earnings from this new business is starting to come through. With similar opportunities in the corporate market in Australia, we are forecasting growth of 10% for our second year of ownership.
Overall, the Dorchester group is now very well positioned. We remain quite comfortable with our earlier guidance of a profit after tax of $6 million from existing operations for the current financial year, with this increasing to $10 million over the subsequent two years.
We are also confident that M&A opportunities will add to these profit forecasts. The recently announced Capital Restructure will ensure we receive a cash injection of around $20 million next month. It will also significantly strengthen the balance sheet with shareholder funds doubling to around $65 million, providing the company with the ability to execute our organic and M&A growth strategy."
ENDS
Looking promising for them.
Bermuda It would be very tight to get them through the share registry and Exercised by 5PM on the 31st of May IMHO the 27th would be last practical day
Bermuda I agree with your last two posts. IMO the selling of options, and or heads to fund them should be petering out about now and can't see them getting much cheaper. Wouldn't be surprised to see the heads pick up nicely next week once the uncertainty is out of the way - options, and notes sorted, and we have a simple share-only structure.
how about this week?...... Today??
I don't think the placement will be anything like 30 million. There are only 67.5 million to be taken up other than the major shareholders so with say only a 66% take up of those, leaves 23 million to place.
To have to place 30 million would mean almost $4 million written off by ill informed or unaware investors.
i think they may get a 10% no reply from smaller investors, meaning a placement of only about 7 million.
Will be surprised if it's much more and if it is this small, that should help underpin the share price and make good press.
Paul Brynes would seem to have his head screwed on.
Disc. I am adding to my holding at around these levels. They may fluctuate a little lower, but don't think by much.
IMHO. DYOR.
I
Also, note these comments on M&A from the full year results, which was also mentioned in the capital restructure announcement. Unless it is just wishful thinking on their part it would seem to me to indicate they probably have M and/or A already lined up, if not in the can.
....
Overall, the Dorchester group is now very well positioned. We remain quite
comfortable with our earlier guidance of a profit after tax of $6 million
from existing operations for the current financial year, with this increasing
to $10 million over the subsequent two years.
We are also confident that M&A opportunities will add to these profit
forecasts.
Last day today to sell Options DPCOA.
EXERCISE: DPC: Dorchester Pacific - 134 million options excercise
5 June 2013
Company Announcement
134 MILLION DORCHESTER OPTIONS EXERCISED
Dorchester Pacific Limited (DPC) today announced that approximately 134
million options of the 150 million options on issue have been exercised and
will convert into ordinary shares. The shares will be issued on the 17th
June 2013.
CEO and Executive Director Paul Byrnes said the number exercised was higher
than the 120 million to 125 million expected.
"This is a surprisingly good outcome. We are now working with major
shareholders to see if some of their holdings can be made available as a
small secondary pool to go towards meeting placement demand. As previously
advised the total of new shares issued through the exercise of options and
the share placement will be limited to 150 million shares."
ENDS
A good outcome for Dorchester ......
10.6% shortfall in fact. Great result.
"This is a surprisingly good outcome. We are now working with major
shareholders to see if some of their holdings can be made available as a
small secondary pool to go towards meeting placement demand.....
Placement demand? let them buy on the market!
Here we go. THe sellers are starting to come out of the woodwork. With new shareholders (option converters) being allocated their shares shortly this stock (could) come under some pressure. Also those "insto" investors that got their shares at 25 cents may be inclined to sell? Or am I getting the vibe all wrong? Remember most of the profit this year will come from the gain made on the purchase of DPC 010's at a discount to book value.
This stock is now available at 26 cents but I do believe it may fall a little further as the 100 million plus option converters (who paid 12.5 cents to get a share) start finding their FIN's and CSN's and get their brokers to sell at these levels for a nice (perceived) profit.
Contrary thoughts welcome as I am looking at buying some of this stock just not sure what is a fair entry level.
Help me out here please.
This company has 358,740,632 shares on issue as per NZX
They say $6mil profit for year ending 31 Mar 14. And 40% of that going to dividends.
So at $0.26 per share....this equals a return of 2.6%. Not overly attractive.
Does this seem correct ?
I am also somewhat confused by the number of shares.
NZX states number above.
But a Dorchester document (7 June 2013) refers to "208 million shares currently on issue".
https://www.nzx.com/companies/DPC/announcements/237177
This number makes a big difference...which is correct ? Or perhaps both ?
Have they simply created these additional shares ? If yes......then is there a risk that they continue to do so ? Thus diluting the dividend ?
Can someone educate me please.
Cheers
RTM.
Yes your 2.6% NET figure is correct.
NZX is usually correct on shares. Between now and 7 jun 2013 lots of options were converted and a few other shares have been issued (see this for instance)
Best Wishes
Paper Tiger
Maybe for you PT, many thanks, making progress.
Bear in mind they placed shares with instos and others at 25c. I put my hand up for some and was scaled back as no doubt were the instos, due to the surprising take up of the options.
I would suggest that around these levels would be good buying, and at 25c or less I will be looking at buying some more, although I have quite a few already.
To me this is a growth stock, at this point any dividend is a bonus.
There will soon be 468 million shares on issue... so do be aware of this. A simple conversion of convertible notes anyone?
Blackcap The convertable notes were compulsorily redeemed in September last year.
And is there no holding period ? Can they sell them straight away ? As we are seeing with SNAK ?
I cant tell you that off the top of my head that one RTM. They have not been converted as yet anyway. But as for the options that have recently been converted into shares at 12.5 cents there is not holding period whatsoever as far as I know. Definately not for the Joe Public who have converted their options. This fall in share price of the last 2 weeks is no surprise to me at all.
I clearly have chosen the wrong career path. There are a lot easier ways to make money.
Thanks blackcap.
DPC 1 May announcement talks about the early redemption of the convertible notes (don't worry they won't be forcing an early redemption at a discount on those holders as they did with the DPC010 bonds}. DPC010 bond holders were originally debenture holders prior to 2007/08 meltdown. The convertible notes are held by the big boys who are only set to gain from the conversion and they vested interest to dilute non convertible notes holders when they convert them in July to ordinary shares this year. Aren't they great blokes, still going pay themselves interest to 31 July 2015, not just to 31 July 13, but wait they will be kind to other shareholders by discounting the interest for 2 years the notes are no longer-what gentleman.
Extract of announcement
The Company is also proposing an earlier conversion to ordinary shares of the
110 million ($11 million) Optional Convertible Notes, which would otherwise
be due for repayment (or conversion to ordinary shares, at the Noteholders'
option) on 31 March 2015.
"We have proposed an early July 2013 payment of interest to 31 March 2015 at
a discounted rate and a conversion of the Optional Convertible Notes to
ordinary shares following the payment. The Noteholders have indicated
acceptance of this arrangement and we will be calling a meeting of
shareholders to approve the transaction. The $11 million of debt on the
balance sheet would then become equity." said Mr Byrnes.
As a result of these transactions, shareholders' funds of approximately $29
million at 31 March 2013 would increase by $21 million to $50 million
following the exercise of the options and the share placement, and would
further increase to $61 million on conversion of the Optional Convertible
Notes to ordinary shares in July 2013.
Hi Romulus,
Are you suggesting that the convertible debt notes are going to be converted early (ie in 2013), but the holders of the notes are still going to get interest till 2015? I may be reading it wrong but that would seem outrageous. Who are the holders of the convertible notes? Is this information publicly available?
I am trying to make sense of it. So the notes 11 million of them, will be converted to shares at 10 cents per share. At present the notes pay interest to the note holders and would normally run till March 2015 upon which either the company pays them back the $11m or converts to shares. Now they want to convert to shares early at 10 cents and also get interest till 2015. Doesn't seem fair if you ask me. But shareholders can vote on this issue can they not? I don't think I will be in a hurry to buy these shares at 25 cents anytime soon. After conversion there will be 468 million on offer. Plenty more room for the share price to slip I think.
Thanks Biker, like I suspected. The share price seems to be reacting accordingly as well... down to 23 now.
I don't see the notes as a big issue. It is tidying up outstanding debt ( at a fairly high rate of interest) which will become equity, the capital was needed back in 2011 to help get the company to where it is now, and the notes would convert in 2015 anyway. The interest to 2015 will be paid at a discounted rate. ( not sure of the formula)
I think 23c is a buying opportunity with a medium term view. Another 12-18 months will make a big difference to this company IMHO, but DYOR
Thats where I differ from your view Biker. I do see the notes as a big issue. The debt could be paid back in cash but now the debt is being issued at 10 cents a share further diluting existing shareholders. I know its up to the discretion of the debt holders and not the company as to how they convert.
For me there are just too many shares outstanding to be buying at present. A lot of the profit that they will announce this year will not be from operations but "profit on repurchase of Notes (DPC010's) at a discount to face value".
Granted the company could go places and does have some interesting prospects, just not for me at a market capitalisation of $107 million. (468 million shares at 23 cents) I see this company more fairly priced on a cap of about 60-70m so about 12.8-14.9 cents per share. But that is just my two pence worth.
In July DPC will have no notes no options and just one type of share. Very clear I'd say!
I have HNZ also but see DPC with greater potential for growth - organic and M&A.
( and apropos CNU, I don't work for DPC!)
Very clear after July, but by then the damage will have been done. With damage I mean the dilution of ordinary shareholders share in the company. For me DPC has great potential but I would like to see them prove themselves first before venturing in again. I think Paul Byrnes is doing a stellar job and knows how to run the ship. I just cannot see DPC capitalised at over $100m. It just does not make sense. Will be watching their cash flow from operations when the financials become available as that may tell the real story.
Here come the additional 110 million shares at 10 cents....
Early Conversion of Optional Convertible Notes
Resolution 8
That the early conversion of 110 million optional convertible notes into 110
million ordinary shares in the Company, as further specified in the
explanatory notes accompanying the Company's notice of annual meeting of
shareholders dated 2 August 2013, is approved for all purposes, including for
the purposes of NZSX Listing Rules 9.2, 7.3.1(a) and 7.5 and Rule 7(d) of the
Takeovers Code.
23 August to be precise but again it is dilutionary and may explain the recent lackluster performance of DPC. In addition the note holders are going to get $1.7m of interest as if the notes were to go to 2015. But they are not and they are getting shares at 10 cents. So the $11m loan will cost shareholders $1.7m in interest and a huge dilutionary factor. Not very good in my opinion.
All things going well though I believe 18-20 cents may be a good entry point if they can attain the profit they predict.
Agree with you that this was signaled and if not wouldn't be hard to work out. Agree also that none of the 110m new shares will likely be sellers. (Unlike option converters) However what it does do is dilute any profit that would be coming towards me as a shareholder (yes i still hold a couple of thousand after selling the rest of my shares) and therefore reduces EPS considerably. That is why I think 18-20 cents is fair value if (and that is the question) they can attain the profits they predict.
Maybe people are now starting to read between the lines in the Simmons report. Last sale at 21 cents and soon they will be cheap to buy. I just wonder who it is that is selling out. Is it the instos that got in the placement at 25 thinking "blow this for a joke" or is it the people who converted the options recently for 12.5 cents?
AGM reports as a rule are positive. Predicting $10m profit in 3 years time on 468 million shares. That is if they can achieve 30% growth. Not a given either. Not really setting he world on fire I would have thought. Merger activity could be interesting and they do have some good people on board. Around the 20 cent mark it could be worth a punt but plenty of other prospects out there.
Hi All,
Long time poster on this forum but first time poster on this thread. I will start out by declaring my interest. I do not hold Dorchester shares and never have. I am however a long term holder in Turners Auctions, the company in which Dorchester has this year bought a significant stake. So I have a cousinly interest in how DPC, the finance partner of TUA is going.
I have a bit of a problem with finance company shares, in that 'conventional' metrics such as PE ratio, dividend yield etc. can be suddenly made meaningless by a mismatch of cashflows between assets and liabilities. So I have taken to measuring such companies using a separate 'financial yardstick' inspired by UBS and First NZ Capital when they produced guidelines for another finance company (PGW Finance) to follow after the financial crisis to 'steer themselves clear'.
So without further ado, I will dive into the Dorchester FY2013 financial report and see how they stack up against these 'steer clear of the rocks' statistics.
SNOOPY
'EBIT' not listed in the DPC FY2013 annual report so I have had to derive it from other numbers. That means adjusting the NPAT for tax refunds before finallly adding back the interest expense.
($-0.133m + $2.355m)/$2.355m = 0.9453 < 1.2
=> DPC fails the EBIT to Interest Expense Ratio test.
SNOOPY
The gearing ratio in based on the underlying debt of the company, stripping out the loans made to others on the balance sheet.
$70.765m -( $7.834m + $16.370m + $4.681m ) = $41.880m
Likewise on the asset side of the balance sheet we have to strip the finance receivables from the other (underlying) company assets. From the Balance Sheet.
$103.955m - $28.757m = $75.198m
Gearing Ratio = Underlying Liabilities/Underlying Assets = $41.880m/$75.198m = 55.7% < 90%
=> Pass Test
SNOOPY