Author Topic: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?  (Read 47867 times)

intothebreach

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #20 on: January 07, 2016, 03:19:00 PM »
Excellent YTD return on both of these preferreds with the DC.PR.B up 14.8% and the DC.PR.D up 16.6%.

Sculpin, thanks again for pointing us out toward Dundee's preferred shares. I bought in big time, and it's fun to have something going up when pretty much everything is begin dragged with the market.


tinhb

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #21 on: January 07, 2016, 06:09:32 PM »
Hi sculpin, thank you for your posts. I'm just curious about your return last year since your stock picks have performed very well. If it's ok with you, can you tell us about your last year return and how do you normally size your bets on cases like Dundee?

sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #22 on: January 08, 2016, 07:28:27 AM »
Hi sculpin, thank you for your posts. I'm just curious about your return last year since your stock picks have performed very well. If it's ok with you, can you tell us about your last year return and how do you normally size your bets on cases like Dundee?

Not a great return in 2015. Only 1.4% - too much energy holdings. Perhaps 2016 will be better with an eventual turnaround in oil and natural gas prices looking to happen sometime this year. I have no set % size allocations. I tend to accumulate positions as they drop and reduce them as they begin to get expensive - the opposite of what most traders will tell you.

I see the Series 4 preferred holders persistence has paid off.....

The Financial Post reports in its Friday, Jan. 8, edition that holders of Dundee's Series 4 preferred shares, who responded negatively to an initial proposal, have emerged victorious. The Post's Barry Critchley writes that the pref holders won because Dundee listened and changed a plan that seemed destined to be shot down at a meeting originally scheduled for Jan. 7. Put it down as a victory for shareholders and common sense, a victory reflected by the market's reaction: the prefs shares rose by 15 per cent Thursday on the news. Chief executive officer David Goodman says, "We have consulted and we responded with what we think is a win-win solution." However, the outcome -- offering better terms to the holders of the outstanding $107.04 million prefs -- raises an obvious question. How out of touch were those involved with the original proposal that seemed, through consent payments, to consider the interests of the investment advisers more than the interests of the owners of the securities. Originally, Dundee said it had received "substantial support" from representatives of "significant" holders of the prefs. Dundee's new proposal will be voted on at a Jan. 28 meeting.

http://business.financialpost.com/news/fp-street/dundee-corp-listened-and-responded-with-better-proposal-on-amending-its-preferred-shares


gokou3

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #23 on: January 08, 2016, 10:23:34 PM »
I am long the series 4.  Got pretty lucky with the timing.  I actually bought @$17.xx before they announced the amendment proposal, thought it was shitty but was able to sell at breakeven.  Later, the market agreed with me on the shittiness of the deal and the price dropped drastically.  I decided to buy again in mid-Dec at $14 and on the EOD the price fell to $13 (ouch).  However, at $14 I figured the YTM is 14%+ which is even higher than their perpetual issues.  Beats me why I didn't buy a lot more than I did.

Anyways, enough bragging (rest of my portfolio went down the drain today).  Here's a pretty good blog on pref shares and this article discusses the amended proposal.  The author still recommends to vote NO.

http://prefblog.com/?p=31896

Cardboard

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sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #25 on: January 15, 2016, 09:50:59 PM »
A favourable mention for the Dundee pref's in Broadview's annual shareholder letter....

http://www.broadviewcapital.ca/wp-content/uploads/December-2015.pdf

Positioning and New Ideas for 2016:

It is not for lack of trying that we have not materially increased our net exposure of late. We have growing stacks of new files on both our desks. Most definitely there will be wonderful opportunities to make money from recovering stock prices from amongst these piles.
In a previous letter we mentioned Dundee Corp (DC-A), as an example of the sort of things we were looking at as a way to wade into the stock market wreckage and pull out some treasure. So far we have not bought any stock in Dundee as we have been unable to gain confidence that the value of its book is meaningfully higher than the stock price. Admittedly, we are running it through the wringer using brutally conservative assumptions.

Our work on the company led us to its balance sheet. The majority of the company’s capital structure, apart from the equity, is preferred shares (or “prefs” as they’re commonly known). This is an asset class of which we have never fully understood the appeal. At the issue price, prefs are inferior to senior debt given the lack of covenants or defined maturity and inferior to equity as you get no real upside. For your trouble you get around 5% or 6% annual return. No thank you.

Now with Dundee’s preferred shares being cut in half, we completely understand the appeal. These things are great! We are now owners of all three series of Dundee preferred shares (DC.PR.B, DC.PR.C and DC.PR.D) with yields in the double-digits. While our draconian assumptions have left us undecided as to whether or not the equity of Dundee is a bargain, there is no objective scenario under which the prefs are impaired.

The management of Dundee (or more accurately the previous management) has destroyed a great deal of value through poor investments. We are confident that under its new CEO this era has come to an end and the company will cease pouring capital into far-flung resource ventures. In order for the value of the prefs to be called into question, Dundee would have to re-double its previous efforts at chasing a failed dream across the globe. It is our firm belief that this will not happen.

We mention this investment(s) to illustrate that a) we are actually doing something even while hidden under a pile of coats and b) investing can follow an unusual path. We started with Dundee’s equity and ended up with the preferred shares as that is where our research took us. Being objective, open- minded and free of investment constraints led us to what we believe will generate a very solid return for our investors. This is not dissimilar to our investments in the distressed convertible debenture space which continues to yield some very compelling opportunities. We think the flexibility we have, both by mandate and by mentality, is a major advantage particularly in more challenging markets.


sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #27 on: February 15, 2016, 12:40:32 PM »
Copy/paste from few slides from Broadview presentation at Toronto CFA 2016 Investment Symposium.

http://www.broadviewcapital.ca/contact-us/

Our base case assumption is that Dundee will deploy an additional $116m
into cash-burning investments and we capitalize corporate expenses at $100m
Net of these assumptions we derive ~$478m of asset value to cover $237m
par value of preference shares


Goodman Family, backed by any of their well-heeled partners or friends,
decide they’re done with the public market

 If anyone has a contrarian, super-bullish view on commodities or other “hard assets”
Dundee Corp would be as good a play as any
 Prefs face value of $25 comes into play.
 More than 100% upside on Series 2 and 3 Prefs

Conclusion

 Huge dislocation in small cap stocks and rate reset preferred share
market are causing investors to overlook the risk/reward proposition
 Current dividend yields between 8% and 13%
 Worst case implied IRRs of 10% to 13% plus warrant potential
 Base Case asset coverage 2.0x
 Potential to see upwards of 100% capital appreciation should Dundee
clean up its asset base and prefs trade to 8% yield (Series 2 and 3)

sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #28 on: February 15, 2016, 12:49:57 PM »
ACTIVIST OPPORTUNITY

I encourage all shareholders on this board to call Lucie Prescot, the CFO, and encourage her to buyback shares. She's very friendly towards shareholders and understands value investing. The more she hears from shareholders encouraging a buyback, the more likely they'll buyback or increase their buybacks this quarter if they are already doing so.

Phone: 416.350.3388

She returns calls promptly.

Dundee should be buying back their prefs at these prices (>half off sale). Oil & some of their holdings will most likely rebound strongly at some point in the not so distant future.

Cardboard

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