Author Topic: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?  (Read 86152 times)

sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #10 on: December 22, 2015, 08:54:52 AM »
The opportunity in certain Dumbdee rate reset preferred shares seems highly compelling. The distasteful goings on with the Pref C shares along with the drop in the market price of the common has people liquidating their positions in 2 classes of DC preferreds either in fear or to take advantage of tax losses by the 24th of December in Canada.

Dundee Preferred Series 2 - DC.PR.B - this is a 5 year rate reset at 4.1% above the Canada 5 year bond. Next rate reset is 30 Sep 2019 so a little under 4 years. Current dividend is $1.422 and the prefs are now trading at $11. So the current dividend yield until September 2019 is 13% and the par value of the shares is $25.

Dundee Preferred Series 3 - DC.PR.D - this is a floating rate pref  based on the 90 day Tbill plus 4.1%. Current dividend is $1.14 and with the shares now trading at $8.00 the yield on the floater is currently 14.25%. This series gives nice participation for those who believe interest rates will rise one day. As with the previous pref, the par value on these shares is $25. At $8 on the DC.PR.D, a potential $17 per share capital gain is a possibility given the potential for:

1. increase in confidence in the business operations and value in Dundee's portfolio
2. change in sentiment towards increased short term interest rates in Canada
3. a potential takeover or privatization of Dundee with these preferreds being redeemed at $25 par.



Rasputin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #11 on: December 22, 2015, 11:48:11 AM »
Thanks for the preferred shares info.

I have been looking into Dundee mainly because my relative invested in TauRx (methylene blue for Alzheimer), one of Dundee's investment. 

I think a lot of the NAVs are zeroes (o&g reserves in Chad seriously?), and it's a collection of crappy asset (Dundee securities results vs Merrill lol) so I haven't pulled the trigger.  I get about $5.5 in NAV valuing their publicly traded securities + Dundee securities and 360 real estate at book value minus their corporate and dundee energy debt, zeroing everything else.

However the preferred look very interesting, I bought some series 3 shares today. 

intothebreach

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #12 on: December 23, 2015, 01:19:23 PM »
sculpin, thanks for the info on the preferred. Just bought some Series 3.

BG2008

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #13 on: December 23, 2015, 10:42:08 PM »
Sculpin,

I've been eyeing this a bit.  Yes, there's a large discount to NAV.  But if you look at the NAV, there's embedded leverage behind the NAV.  It's a bit easier with the publicly traded positions.  The private companies are very hard to figure out.  I don't think I've seen a company destroy so much value.  It seems like everything that they touch turned into a turd. 

With regard to the Canadian resets, I also don't think that $25 par is the right price.  Many of the rate reset prefers trades substantially below $25 after the reset.  Although, larger spreads +4% helps a lot. 

Cardboard

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #14 on: December 24, 2015, 07:01:09 AM »
When a company is mostly investing in commodity related businesses, then its results will look ugly during the down cycle. However, from everything I have read, even if you are to make drastic cuts to their holdings and going as far as using $0 for many, the share price is still trading below NAV.

Now we are talking preferred's. So if there is any indication of value left for common shareholders then the preferred's should be trending to par over the long term. The company is obligated to continue paying the dividend at the agreed rate forever. The only way for them to stop that is to buy it back at par, make a sweat offer to holders but, at less than par or to buy them back on the stock market.

Regarding the debacle that has happened to preferred's in Canada this year, a lot of that is based on fear. Fear that interest rates will go lower and forever... And even that logic is stupid. If you take a look at a large list of these, the vast majority were trading between $20 and $25 just 9 months ago. So I suppose that back then, and during the prior years, that the dividend yield obtained by investors on these instruments was considered sufficient and attractive enough vs the risk and other income avenues out there?

Let me give an example: BCE.PR.H. This floater pays a dividend based on the Canadian Prime Rate fixed by banks. It is at 2.7% currently. So that is the privilege rate that your bank will lend money to you. The lowest rate you can obtain without offering a guarantee such as a home. If you turn around and ask them how much they will give you in interest for your funds without any holding period, it will be in the 0.5% range. So this instrument gives you the same as they charge you as income but, taxed much lower than regular interest.

The Bank of Canada has cut twice its rate this year by 0.25% each time. The banks did not fully follow and have cut their Prime Rate by 0.15% each time. The Bank of Canada rate is now 0.5%, so if they cut it to 0% and banks continue their pattern of cutting only by 0.15%, then the absolute low for the bank prime rate is 2.4%. And since banks in the past were cutting by the same percentage as the Bank of Canada (I think it was the first time ever that they didn't), will they follow at all or just cut by 0.10% next time?

Based on par of $25, that 2.4% would mean an annual distribution of $0.60. The thing trades at $13.20 for a yield of 4.55% based on that distribution. However, based on the current 2.7%, the distribution is $0.675 for a yield of 5.11%.

Where can you get that kind of income or the equivalent in interest of 7%+ after tax with near zero risk of default and with full participation or protection in any increase in interest rates?

I mean, even if you believe that interest rates will remain as is for the foreseeable future, isn't this yield way too high vs what you can get from a GIC, treasury bond or other income instrument? And in these you are locked in. Either you will lose value on any increase in interest rates or be forced to hold to maturity.

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Rasputin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #15 on: December 31, 2015, 08:53:31 AM »
News about TauRX.  Next year will be interesting.  If that $15 billion valuation hold, Dundee will make 10 times their investment. 

http://www.wsj.com/articles/singapore-developer-of-alzheimers-drug-plans-u-s-ipo-1451543494

sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #16 on: December 31, 2015, 09:15:09 AM »
News about TauRX.  Next year will be interesting.  If that $15 billion valuation hold, Dundee will make 10 times their investment. 

http://www.wsj.com/articles/singapore-developer-of-alzheimers-drug-plans-u-s-ipo-1451543494

Dundee has put in $30 million US?


Rasputin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #17 on: December 31, 2015, 09:47:31 AM »
yeah i think they invested $30.5 million for 1.015 million shares.  Book value was CAD 68 million as of 9/30/2015. 

There is about 23.5 million Taurx shares outstanding after latest round of financing.  Latest round of financing was at $60 per share. 

sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #18 on: January 01, 2016, 12:02:32 PM »
yeah i think they invested $30.5 million for 1.015 million shares.  Book value was CAD 68 million as of 9/30/2015. 

There is about 23.5 million Taurx shares outstanding after latest round of financing.  Latest round of financing was at $60 per share.

If they can monetize this sometime in the next year than this will solve any of their liquidity problems.

The owners of TauRx Pharmaceuticals Ltd., which counts Singapore state investment company Temasek and Southeast Asia’s largest casino operator, Genting, as investors, are looking at listing on the Nasdaq Stock Market as early as 2017 in a deal that could value the company at about $15 billion, according to people familiar with the matter.

An IPO would provide an avenue for shareholders to exit their investment in TauRx. The firm has raised $350 million to date from the likes of Temasek, the Development Bank of Singapore and the Dundee Corp. of Canada, according to its official website. Genting, a Malaysian casino-to-plantations conglomerate, is the largest shareholder with a total exposure of $120 million.



sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #19 on: January 07, 2016, 12:48:17 PM »
The opportunity in certain Dumbdee rate reset preferred shares seems highly compelling. The distasteful goings on with the Pref C shares along with the drop in the market price of the common has people liquidating their positions in 2 classes of DC preferreds either in fear or to take advantage of tax losses by the 24th of December in Canada.

Dundee Preferred Series 2 - DC.PR.B - this is a 5 year rate reset at 4.1% above the Canada 5 year bond. Next rate reset is 30 Sep 2019 so a little under 4 years. Current dividend is $1.422 and the prefs are now trading at $11. So the current dividend yield until September 2019 is 13% and the par value of the shares is $25.

Dundee Preferred Series 3 - DC.PR.D - this is a floating rate pref  based on the 90 day Tbill plus 4.1%. Current dividend is $1.14 and with the shares now trading at $8.00 the yield on the floater is currently 14.25%. This series gives nice participation for those who believe interest rates will rise one day. As with the previous pref, the par value on these shares is $25. At $8 on the DC.PR.D, a potential $17 per share capital gain is a possibility given the potential for:

1. increase in confidence in the business operations and value in Dundee's portfolio
2. change in sentiment towards increased short term interest rates in Canada
3. a potential takeover or privatization of Dundee with these preferreds being redeemed at $25 par.

Excellent YTD return on both of these preferreds with the DC.PR.B up 14.8% and the DC.PR.D up 16.6%. This is especially impressive given that the BMO LADDERED PREF SHARE IDX ETF is down 7.3% since the beginning of the year. Both these preferreds have further to run given how badly they fell due to tax loss & grudge selling in 2015. Any return to some positive sentiment in the overall Canadian preferred share market would definitely help as well.