Author Topic: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?  (Read 129551 times)

petec

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #300 on: July 19, 2018, 01:30:15 AM »
What is to be expected from the Parq operations?

Initially management gave guidance to GMP that Parq could do the following financially after a 12 month ramp period - should be the end of the ramp late this Fall...

Management has provided their financial expectations for Parq, which are subject to an
estimated 12-month ramp up period. Parq is on track to open in the fall of 2017.

 $75-$100 million EBITDA
 60-70% from casino activities
 10-15% from hotel activities
 15-30% from other services (food/beverage, parking etc.)


At the end of the first quarter they stated 2018 would look like this...

Parq guidance

Management has given guidance for 2018 and expects to generate EBITDA of
$50 to $75 million and in excess when operations are fully ramped up. As a
result of expected increases in customer traffic and slot utilization rates, 50%
to 60% of EBITDA is expected to be generated through casino operations
while the remainder is from hotel operations and beverage services.


So the contribution from the casino seems to be about 10% below in the overall results of the facility. It will be interesting to see if this is further adjusted in the Aug/Sep after experiencing the height of the tourist season in Vancouver (June - Aug). Potential value of Parq to Dundee using a simplistic valuation model of expected 2018 results is as follows ( On a fully converted basis, the Corporation holds a 45.9% interest in Parq Vancouver, while Paragon Gaming Inc. owns a 21.9% fully converted interest, and PBC owns a 32.2% fully converted interest)....

                EBITDA high     EBITDA low

               $75mm            $50mm

                 10X                 10X

EV              $750mm          $500mm

Debt           $550mm          $550mm

Equity         $200mm          ($50mm)

46% DC      $92mm             $0

At the upper end of the range value comes in at $90 million to Dundee using $75mm in EBITDA while Parq is owned by the debt holders at the lower end. Hopefully, upon full ramp in 2019, Parq can achieve the initial expected results resulting in a floor valuation to Dundee of $90mm & upside to a $200mm valuation with $100mm in EBITDA & possibly a much better financing arrangement.

As well, perhaps higher value & substantial financial breathing room could be extracted by selling the hotel operations in what is a strong Vancouver market - an example per room valuation multiple for the hotels would be $425,000 per room average over both the Douglas & Marriot's 517 guest rooms gives a valuation of $220mm just to the hotels & their expected approximate 15% - 25%  contribution to Parq EBITDA.

https://www.statista.com/statistics/496256/vancouver-downtown-value-per-hotel-room/

http://dailyhive.com/vancouver/interim-hotel-rooms-development-policy-vancouver-shortage

Vancouverís tourism sector growth has been experiencing year-over-year records with overnight visitation, but this is not reflected in the cityís hotel accommodations capacity. A new report by the City of Vancouver states the municipality saw a net loss of 1,105 hotel rooms between 2008 and 2018, with the gains in the years leading to the 2010 Winter Olympics now lost.

I came up with similar numbers on an ev/ebitda analysis. I didn't think of the hotel valuation separately. For me the big question is whether initial guidance was just wrong, and 75-100 will never be reached, or the issue is more the ramp time, in which case we might still get there but slower. Either way we don't really have enough info.

I was also struggling with the appropriate multiple to use. I also centred on 10 but ran 8 and 12 for interest. These are hard and trophy assets which might argue for a higher multiple than the average equity analyst (me) would be comfortable assuming.


Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #301 on: July 19, 2018, 07:31:21 AM »
What is to be expected from the Parq operations?

Initially management gave guidance to GMP that Parq could do the following financially after a 12 month ramp period - should be the end of the ramp late this Fall...

Management has provided their financial expectations for Parq, which are subject to an
estimated 12-month ramp up period. Parq is on track to open in the fall of 2017.

 $75-$100 million EBITDA
 60-70% from casino activities
 10-15% from hotel activities
 15-30% from other services (food/beverage, parking etc.)


At the end of the first quarter they stated 2018 would look like this...

Parq guidance

Management has given guidance for 2018 and expects to generate EBITDA of
$50 to $75 million and in excess when operations are fully ramped up. As a
result of expected increases in customer traffic and slot utilization rates, 50%
to 60% of EBITDA is expected to be generated through casino operations
while the remainder is from hotel operations and beverage services.


So the contribution from the casino seems to be about 10% below in the overall results of the facility. It will be interesting to see if this is further adjusted in the Aug/Sep after experiencing the height of the tourist season in Vancouver (June - Aug). Potential value of Parq to Dundee using a simplistic valuation model of expected 2018 results is as follows ( On a fully converted basis, the Corporation holds a 45.9% interest in Parq Vancouver, while Paragon Gaming Inc. owns a 21.9% fully converted interest, and PBC owns a 32.2% fully converted interest)....

                EBITDA high     EBITDA low

               $75mm            $50mm

                 10X                 10X

EV              $750mm          $500mm

Debt           $550mm          $550mm

Equity         $200mm          ($50mm)

46% DC      $92mm             $0

At the upper end of the range value comes in at $90 million to Dundee using $75mm in EBITDA while Parq is owned by the debt holders at the lower end. Hopefully, upon full ramp in 2019, Parq can achieve the initial expected results resulting in a floor valuation to Dundee of $90mm & upside to a $200mm valuation with $100mm in EBITDA & possibly a much better financing arrangement.

As well, perhaps higher value & substantial financial breathing room could be extracted by selling the hotel operations in what is a strong Vancouver market - an example per room valuation multiple for the hotels would be $425,000 per room average over both the Douglas & Marriot's 517 guest rooms gives a valuation of $220mm just to the hotels & their expected approximate 15% - 25%  contribution to Parq EBITDA.

https://www.statista.com/statistics/496256/vancouver-downtown-value-per-hotel-room/

http://dailyhive.com/vancouver/interim-hotel-rooms-development-policy-vancouver-shortage

Vancouverís tourism sector growth has been experiencing year-over-year records with overnight visitation, but this is not reflected in the cityís hotel accommodations capacity. A new report by the City of Vancouver states the municipality saw a net loss of 1,105 hotel rooms between 2008 and 2018, with the gains in the years leading to the 2010 Winter Olympics now lost.

I came up with similar numbers on an ev/ebitda analysis. I didn't think of the hotel valuation separately. For me the big question is whether initial guidance was just wrong, and 75-100 will never be reached, or the issue is more the ramp time, in which case we might still get there but slower. Either way we don't really have enough info.

I was also struggling with the appropriate multiple to use. I also centred on 10 but ran 8 and 12 for interest. These are hard and trophy assets which might argue for a higher multiple than the average equity analyst (me) would be comfortable assuming.

I think based on projections from Dundee we could have a high confidence that EBITDA will come in at somewhere between 50M and 100M when fully ramped. Multiples I've seen for hotel and casino properties range between 10 and 12. So that gives a valuation range of 500M on the low end to 1200M on the high end. Debt plus preferreds plus a little for additional capital contribution is 700M. So the equity value could be anywhere from 0 to 500M. Dundee, I believe has 37%, giving a value to them of 0 to 185M or $0 to $3 per share. I don't think I could narrow this range down at this point. We really do need to wait and see. Encouraging factors are the very tight hotel market in Vancouver, the growth of tourism, the uniqueness of the property, the low land lease rate, and the high current valuations and investor interest in commercial properties in Vancouver.

petec

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #302 on: July 19, 2018, 08:11:05 AM »
I think based on projections from Dundee we could have a high confidence that EBITDA will come in at somewhere between 50M and 100M when fully ramped. Multiples I've seen for hotel and casino properties range between 10 and 12. So that gives a valuation range of 500M on the low end to 1200M on the high end. Debt plus preferreds plus a little for additional capital contribution is 700M. So the equity value could be anywhere from 0 to 500M. Dundee, I believe has 37%, giving a value to them of 0 to 185M or $0 to $3 per share. I don't think I could narrow this range down at this point. We really do need to wait and see. Encouraging factors are the very tight hotel market in Vancouver, the growth of tourism, the uniqueness of the property, the low land lease rate, and the high current valuations and investor interest in commercial properties in Vancouver.

That's more or less the same conclusion I came to although I "converted" the prefs, only subtracting the debt and giving Dundee 46% not 37%. Works out at about the same NAV range though, and I have no confidence to call where in the range reality will fall.

My overall view is that taking the stocks at market and haircutting most of the other assets by 50%, I could have about 20% downside from here in the common; but if either Parq or United work out, I have enormous upside.


Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #303 on: July 27, 2018, 02:30:41 PM »
D and B prefs trading around 10 now. That's over 14% yield on the B and more like 15.7% when it resets next year (at current 5-year bond yield). Does this not represent an extreme degree of pessimism?

longlake95

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #304 on: July 28, 2018, 08:22:21 AM »
i've been adding to the D's. Not sure what to think. These securities have been left for dead. Call me crazy, but wouldn't they want to buyback the pref's on the cheap? sell one or more of the cash consuming crappy businesses and use the proceeds to buyback cheap debt - don't you create value at the stroke of a pen?
« Last Edit: July 28, 2018, 08:32:40 AM by longlake95 »

Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #305 on: July 28, 2018, 10:58:10 AM »
i've been adding to the D's. Not sure what to think. These securities have been left for dead. Call me crazy, but wouldn't they want to buyback the pref's on the cheap? sell one or more of the cash consuming crappy businesses and use the proceeds to buyback cheap debt - don't you create value at the stroke of a pen?

I think that stock buybacks are part of the plan once the balance sheet has been sorted out.

petec

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #306 on: July 28, 2018, 11:18:49 AM »
i've been adding to the D's. Not sure what to think. These securities have been left for dead. Call me crazy, but wouldn't they want to buyback the pref's on the cheap? sell one or more of the cash consuming crappy businesses and use the proceeds to buyback cheap debt - don't you create value at the stroke of a pen?

I think that stock buybacks are part of the plan once the balance sheet has been sorted out.

Have they said so?

bizaro86

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #307 on: July 28, 2018, 11:31:04 AM »
i've been adding to the D's. Not sure what to think. These securities have been left for dead. Call me crazy, but wouldn't they want to buyback the pref's on the cheap? sell one or more of the cash consuming crappy businesses and use the proceeds to buyback cheap debt - don't you create value at the stroke of a pen?

Creating value doesn't necessarily seem to be their MO here.

Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #308 on: July 28, 2018, 12:37:33 PM »
i've been adding to the D's. Not sure what to think. These securities have been left for dead. Call me crazy, but wouldn't they want to buyback the pref's on the cheap? sell one or more of the cash consuming crappy businesses and use the proceeds to buyback cheap debt - don't you create value at the stroke of a pen?

I think that stock buybacks are part of the plan once the balance sheet has been sorted out.

Have they said so?

Yes. In the reply to a question at the annual meeting as well as in the conference call for Q1. The idea of stock buybacks, both common and preferred, was raised. Jonathan Goodman said it was the right idea but needed to wait until the balance sheet issues were sorted out first.

SafetyinNumbers

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #309 on: July 28, 2018, 03:52:49 PM »
It would be nice if the family started buying stock too.

Jonathan indicated that he wants to buy common and preferred but Iím really not sure whatís giving him pause. Perhaps, conversion of the DC.PR.Eís to common is a possibility and the common would get hit in that scenario so maybe he wants to save his firepower or perhaps they consider themselves restricted while they are sorting out the balance sheet.
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