Author Topic: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?  (Read 176030 times)

Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #610 on: August 15, 2019, 08:23:34 AM »
Looks like a buyback of B and D preferred shares is coming:

(from news release)

“During the second quarter, we improved our capital structure and lowered our future interest expenses with the successful conversion of our Preference Shares, series 5 to Class A subordinate voting shares of the Corporation” said Mr. Goodman. “Going forward, we will continue to look at ways to optimize our capital structure, lower interest payment obligations and reduce our overall expenses.”

“As part of this, we are taking steps to consider the implementation of a normal course issuer bid and possibly a substantial issuer bid for our Preference Shares, series 2 and series 3. After careful consideration, we believe this provides the Corporation and its stakeholders with more benefits than taking similar action for the Class A subordinate voting shares, which was previously considered by our board of directors,” added Mr. Goodman.

I'm contemplating taking some steps toward considering the option of potentially purchasing some more shares based on this news.

What's with the over-hedged language?  It's seriously taken them an entire quarter to get to progress to this point?

The language on the conference call was much clearer. They are going ahead with a NCIB of the B and D prefs. They see it as a way to retire debt with a par value of $25 at a very large discount. They acknowledge that volumes are low in the prefs so it will be hard to buy in bulk, but they think more volume will appear if they bid up for them. So, I would say that is all very bullish for the prefs. A SIB is something they are considering for the future if and when more cash becomes available.


petec

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #611 on: August 15, 2019, 03:06:27 PM »
The call is also very bullish for the common. Delonex is going the right way, Parq is improving, buying the prefs is super accretive for BV, Android is growing and likely carried below BV, they have a shot at selling TauRx (which I’d assumed was a zero). I think the risk/reward is swinging in favour of the common.
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sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #612 on: August 16, 2019, 08:08:39 AM »
DUNDEE CORPORATION (DC.A – TSX, $0.99) Rating: BUY

Old Target Price: $2.10
New Target Price: $2.60

Q2 FINANCIAL RESULTS – LEANER AND POISED TO MINE PROFITS

Dundee Corporation released Q2/19 financial results after market close yesterday.

Net loss attributable to owners was $7.9M ($0.12/share) vs. a loss of $76.9M ($1.34/share) in Q2/18 and loss of $202.4M ($3.49/share) in full-year 2018. Consolidated revenues were $7.3M in the quarter vs. $13.3M in Q2/18, after the exit of non-core businesses and a focus on the investment portfolio.

In the quarter, the value of the investment portfolio appreciated $11.3M to a total of $310.4M, largely driven by a $16.1M appreciation in the 20% position (36.4M shares) in Dundee Precious Metals. Since quarter-end, the value of this position has increased another $4.7M, while also having the high growth opportunities of its new mine in Bulgaria.

The core of Dundee’s investments is Dundee Precious Metals, Parq Vancouver, Android Industries and United Hydrocarbon International Inc. Management continues to look at divesting non-core businesses in 2019. In Q2, Dundee generated $7.9M from the sale of non-core investments, including the Canadian franchise license for Sotheby’s for $5.0M. Since early 2018, the number of positions has been cut from 100+ to ~30 major investments. As part of the rationalization strategy, G&A expenses have decreased to $9.5M in Q2/19 vs. $18.5M in Q2/18. Management anticipates a $13-14M run rate on G&A by year-end.
On May 10, Dundee announced that Parq Holdings LP had secured a refinancing on its substantial debt load, at a lower fixed rate and less restrictive covenants. This will reduce the total interest expense burden by ~300 bps and is a crucial step for cash flow and operational feasibility at Parq Vancouver.

On May 15, $82.6M in Series 5 Preference Shares was converted into DC.A shares at a $2.00 floor price, requiring issuance of ~42M shares. Dundee paid $1.5M in dividends on these shares in Q1/19. We view the removal of these cash outflows and elimination of the uncertainty surrounding the original maturity date in June 2019 as a positive for Dundee. However, the resulting overhang has placed pressure on the share price.

Management continues to evaluate a NCIB or SIB following conversations with the CRA. The focus has shifted to buying back Series 2 or Series 3 Preference shares rather than Class A shares.

In conjunction with yesterday’s release, Dundee also announced the appointment of Steven Sharpe to its board of directors. Mr. Sharpe is Managing Director of EmBeSa Corporation.
 
Our current core book value analysis indicates an increased target price of $2.60/share (from $2.10) with potential for additional upside if investment performance continues to improve and binary events are realized.

VALUATION

Based on the current values of its known public investments and the carrying value of other core balance sheet items, we calculate a core book value of $2.60/share. Moving forward, the company is focusing on its core competencies (primarily in the resource sector). Thus, performance in commodity prices and idiosyncratic events at larger holdings such as Dundee Precious Metals will have an outsized effect on Dundee Corp.’s book value. As the gold price environment has dramatically improved, Dundee is becoming increasingly attractive for its mining portfolio and the deep discount of DC.A shares vs. the value of its position in DPM alone. We believe that now that Dundee has sold off a substantial portion of its underperforming investments, periods of substantial losses will be much less drastic and frequent. Thus, it is becoming increasingly convincing to see the share price discount to tangible book value (0.2x) now that book value appears to be stabilizing. We emphasize that our core book value analysis ignores a number of potential growth drivers. For example, the value of Parq Vancouver is zero on Dundee’s balance sheet. Now that a refinancing has been obtained, it is much more likely now that Dundee will recover some of its investment value vs. a few months ago. Another large balance sheet item is Resource Assets, which is dependent on payouts and royalties on Delonex achieving first oil at United Hydrocarbon Chad’s assets (sold by UHIC in 2017). Because this is inherently unpredictable and a binary event, we are not including it in our valuation. If first oil were to be achieved in the next couple years, the resulting cash flows would likely be multiples higher than the current book value of Resource Assets, as it is calculated with probabilistic models.

Dundee aims to continue exiting non-core positions, including Blue Goose, TauRx and its $13.7M subordinated loan to Eight Capital. After the sale of Blue Goose, almost all of Dundee’s debt balance would be eliminated (~$52M). Thus as a sale looks increasingly likely, we no longer consider that debt in our core book value analysis.

Analyst: Andrew Hood
416.603.7381 x230
ah@mpartners.c

lessthaniv

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #613 on: August 16, 2019, 12:24:02 PM »
Making progress.
Thanks for the update sculpin
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zuokk

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #614 on: September 04, 2019, 07:05:06 AM »
New rates announced:

With respect to any Series 2 Shares that remain outstanding on September 30, 2019, holders
thereof will be entitled to receive fixed rate cumulative preferential cash dividends on a quarterly
basis, as and when declared by the Board of Directors of the Company and subject to the
provisions of the Business Corporations Act (Ontario). The dividend rate for the five-year period
commencing on September 30, 2019 to, but excluding September 30, 2024, will be 5.284%, being
equal to the sum of the five-year Government of Canada bond yield as at September 3, 2019, plus
4.10%, as determined in accordance with the terms of the Series 2 Shares.

With respect to any Series 3 Shares that remain outstanding on September 30, 2019, holders
thereof will be entitled to receive floating rate cumulative preferential cash dividends on a
quarterly basis, calculated on the basis of actual number of days elapsed in each quarterly floating
rate period divided by 365, as and when declared by the Board of Directors of the Company and
subject to the provisions of the Business Corporations Act (Ontario). The dividend rate for the
three-month period commencing on September 30, 2019 to, but excluding, December 31, 2019,
will be 5.74%, being equal to the sum of the three-month Government of Canada Treasury bills
yield preceding September 3, 2019, plus 4.10%, as determined in accordance with the terms of the
Series 3 Shares.

ADcure?

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #615 on: September 12, 2019, 11:14:17 AM »
I believe that sale of Taurx prior to IPO would be a monumental mistake.

petec

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #616 on: September 18, 2019, 04:06:26 AM »
I believe that sale of Taurx prior to IPO would be a monumental mistake.

Would you mind explaining? A while back the view here seemed to be that TauRx was a dud, the drug didn't work, etc etc. Do you have a different view?
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ADcure?

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #617 on: September 19, 2019, 11:10:34 AM »
2 things about Taurx's drug, #1 it was given "orphan drug status" by FDA for some dementia. #2 if one reads the complete results of last phase 3 trial it becomes apparent that the drug does have a lot of merit, even surprising the folks at Taurx, thus the new trial Lucidty.

Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #618 on: September 19, 2019, 12:12:20 PM »
2 things about Taurx's drug, #1 it was given "orphan drug status" by FDA for some dementia. #2 if one reads the complete results of last phase 3 trial it becomes apparent that the drug does have a lot of merit, even surprising the folks at Taurx, thus the new trial Lucidty.

I'd rather they sell it. The chance that TauRX has commercial value is very low, like all drug development. If it does have value it will be worth a lot. So, it's more of a lottery ticket. I don't think Dundee should be owning lottery ticket investments. They need to focus on more sure bets and rebuild their balance sheet.

petec

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #619 on: September 30, 2019, 01:54:32 AM »
Does anyone known whether the tax reassessment announced last week closes the matter, or could there be further news?
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