Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?

[sculpin]

   
Jim Roumell

Author’s reply » Dundee liquidates Red Leaf for $9.2 million 30% above our estimate of $7 million.

Dundee sells 500K shares of DPM.
finance.yahoo.com/...

https://seekingalpha.com/article/4310589-dundees-dpm-stake-equals-companys-total-enterprise-value-free-option-on-everything-else

[petec]

That was Mark Goodman, who took it over after his father Ned Goodman retired.  Ned was brilliant from what I can tell, he built the business and gave shareholders something like 15-16% per year.  I didn't realize there was a second handoff, but you are still with a new management team.

It has been awhile but I was under the impression that Ned built the business up using financial services.  He ultimately sold that business to one of the big banks.  I am okay with the home building as it's a traditional business and you are competing against smaller operators but where is the evidence that they are exceptional resource investors?  Isn't that where they blew up the company?  Seriously, this company has been an incinerator of capital, I would not invest more without really understanding what they are buying and feeling like the odds are tipped towards me.  In the past you had Ned's reputation but what is there now?  $30 -> $1.  My perspective is, prove it and then maybe I think about it.

My understanding is that Ned was brilliant, and then shot himself in the foot buying a lot of crap after the crisis, motivated (I think) by the belief that money printing would lead to runaway inflation.

I am not sure to what extent Mark contributed to that but he certainly started to unwind it. Then he fell ill and Jonathan took over.

I believe Jonathan had an important role in building DPM, which is undeniably a success, and he has made good decisions since taking over Dundee. So I think we are in OK hands and I certainly don't view the fact that Ned is no longer in charge as a negative.

If I am wrong, someone please correct me.

[petec]

   
Jim Roumell

Author’s reply » Dundee liquidates Red Leaf for $9.2 million 30% above our estimate of $7 million.

Dundee sells 500K shares of DPM.
finance.yahoo.com/...

https://seekingalpha.com/article/4310589-dundees-dpm-stake-equals-companys-total-enterprise-value-free-option-on-everything-else

I think this was below BV though.

They also sold $2.5m of DPM, ceasing to be a control person so that DPM has better fundraising options (apparently). They timed this sale beautifully from what I can see.

[sculpin]

FY20 we model FCF of US$136 mln for an impressive 19% FCF yield

January 9, 2020

Dundee Precious Metals Inc.
DPM (TSX): C$5.18
Stock Rating: Outperform
Target: C$8.50

Risk Rating: Above Average

Ada Tepe Supports Solid Operational Q4/19

Ada Tepe FY19 Production at Top End of Guidance Range

Production beat. Q4/19 consolidated gold production of 69.5k oz (NBF 65.2k oz), up 3.9k oz q/q and 7% above our
estimates. Gold sales of 82.1k oz (NBF 80.6k oz) were up 42.5k oz q/q as the Q3/19 sales deficit was resolved, as expected.
Copper production of 10.0 mln lbs (NBF 9.1 mln lbs) was flat q/q. Mine-by-mine highlights include:
● Q4/19 Chelopech production of 43.0k oz (NBF 40.9k oz), up 2.7k oz q/q and modestly above our estimates. FY19 production
of 173.4k oz was in line with the guidance range (155-187k oz).
● Q4/19 Ada Tepe production of 26.5k oz (NBF 24.3k oz), up 1.7k oz q/q, delivering continued solid performance in its second
quarter of commercial production. Positively, FY19 production of 57.2k oz lands near the top end of the guidance range
(45-60k oz).
Measurable FCF on deck. After preliminary updates, our estimates have improved slightly, and we model Q4/19 FCF of
~US$27 mln (vs. Q3/19 of US$10.2 mln), benefiting from higher gold sales and metal prices (~US$1,483/oz in Q4/19 vs.
US$1,461/oz in Q3/19), with offset from commencement of prepaid gold sales (~46.2k oz over 6 qtrs). Our Q4/19 FCF
estimates factor DPM's ~US$7.7 mln investment in INV Metals Inc. (INV: TSX) which closed Oct. 28, 2019. Looking ahead, for
FY20 we model FCF of US$136 mln for an impressive 19% FCF yield.
Maintaining Outperform rating and $8.50 target. Trading at P/NAV 0.68x (peers 0.80x), P/CF20 4.0x (peers 4.5x) and P/
CF21 3.0x (peers 4.0x). Our target is based on 5.0x EV/EBITDA NTM (100%). DPM reports financials after market close on
Feb. 13 with the conference call scheduled for Feb. 14 that 9 AM EST (dial-in: 1-844-264-2104).

Don DeMarco, (416) 869-7572, don.demarco@nbc.ca
Associate: Rabi Nizami, (416) 869-7925, rabi.nizami@nbc.ca
Associate: Harmen Puri, (416) 869-8045, harmen.puri@nbc.ca

[Cevian]

Anyone listened in today?

[sculpin]

In the MD&A, Dundee have marked their investment in Taurx down to $40mm which represents just over $30 US per Taurx share.

applied a value per share of US$30.60, the equivalent of a 50% discount to the volume-weighted average price of ordinary shares issued from treasury during 2015 and 2016.

The new investor in Taurx is buying shares at $200 US which is 6.5 times the carrying value of DC's Taurx investment on the books. While these shares do have other rights (marketing of drug in Asia etc), the $200US/share value would value Dundee's interest in Taurx at $260 million Canadian or about $2.50 per DC share.

 The investor subscribed for 500,000 class B preference shares at an aggregate subscription amount of US$100 million or US$200/share.  The new class of preference shares does not have any liquidation preferences but convey to the holder a call option to acquire commercialization rights for LMTX® over certain territories in Asia.  The preferences shares are convertible to ordinary shares on a one-to-one basis upon the attainment of pre-specified regulatory and/or listing objectives alongside the injection of a further material amount of cash.

[ADcure?]

Would that investor be Genting or someone else?
Thanks

[petec]

Stock v strong on at least 3 separate days recently, including +30% today. I feel like someone knows something...

[Sportgamma]

Stock v strong on at least 3 separate days recently, including +30% today. I feel like someone knows something...

And at the same time, the prefs aren't moving.

[sculpin]

Good read on Dundee from Ravensource Fund - smart activist style investors. Let's hope they are able to convince the Goodman's to chop G&A more, get more aggressive on selling non core & core assets at decent values & direct proceeds to increase value of both the common & preferred...


Dundee Corp. (“Dundee”) Through a combination of an increase in market prices and dividends earned, our investment in Dundee’s preferred shares was our top performer in 2019, generating a total gross return of 52.5% and increasing the value of your Ravensource investment by 3.4%.
 
Dundee is a Canadian, publicly listed holding company (TSX: DC.A) with investments across a broad spectrum of industries. Ravensource has an investment in Dundee’s Series 2 & 3 preferred shares, which are the highest-ranking securities in Dundee’s capital structure. We believe the preferred shares are mis-priced – the company’s tangible assets are worth several times our purchase price of approximately $12 per $25 preferred share – and there are win-win restructuring initiatives to capitalize on the mis-pricing that the Stornoway Team can help actualize.
 
Our 2019 performance was a result of actions taken by Dundee to de-risk itself and create material asset value of which the preferred shareholders were the prime beneficiaries. Stornoway identified and advocated certain of these initiatives directly to Dundee’s CEO in late 2018 and early 2019. Most importantly, Dundee removed the #1 risk facing our investment by converting $82 million of Series 5 preferred shares that ranked equally with our preferreds into common shares that rank behind us (the “Equitization”). In effect, we jumped the queue to the claim on Dundee’s assets.   
 
While the Equitization was the watershed moment, other value-enhancing milestones in 2019 included non-core asset sales; a buyback program for our Series 2 & 3 preferreds; and Dundee Precious Metals completing its second gold mine, enabling the initiation of a dividend to Dundee.
 
Despite its increase in price over 2019, Dundee’s preferreds continue to trade at just 60 cents on the dollar. This large discount persists even though the market value of Dundee’s publicly traded stake in Dundee Precious Metals alone is worth 2.7x the preferred shares’ market price, and Dundee’s common shares have a market capitalization of more than $115 million despite ranking behind the preferred shares. If the markets are rational, our preferred shares should trade closer to $25.  But to do so, it will take a more encompassing solution than the company has embarked on to date. 
 
In 2019, much was achieved to de-risk Dundee and increase the value of our investment. However, neither we — nor the market — are satisfied. Dundee must aggressively expand its efforts to stream-line its bloated overhead, sell non-core assets and opportunistically restructure its liabilities. Rest assured, in 2020, we will up our ante and intensify our engagement with the company to enhance Dundee’s stakeholder value and capture the value lying dormant in its preferred shares.
 
http://www.ravensource.ca/storage/documents/1587402336-Ravensource_Fund-Letter_to_Unitholders-December_31__2019.pdf