Good news – time to post on another of my holdings – DUPD.
This is a highly undervalued Ukrainian property developer. I have traded in and out over the years luckily getting some of the big rise to 2010 and missing the fall. My main entry was 28p back in September 2012. I have added more today at 36p giving me an average price of 31.4p.
This company has a market cap of £40.5m, on the BS today there is approximately £11m cash as at 30/6. Add to this £3.15m paid on 24/12 from Henryland with a likely £2.2m coming later this year – giving a total of £16.35m.
In addition to this DUPD owns 12.5% of Arricano at the last traded price this is worth about £19.8m. Now this is likely to be illiquid – so maybe they couldn’t get out at this price but then again they did manage to sell a lump of it at IPO – so maybe they could….
This gets us to £36m – just short of the market cap.
So what else does DUPD hold. Well NAV is £125m – so quite a bit more.
Biggest item on the balance sheet is prepayments for land – £31m
On IPO DUPD bought a lot of land around Kiev – at cost £75m now the Ukranian property market has collapsed – so there has been substantial impairment but the co say this is worth £31m. I dont believe them – so lets say £20m. Its very hard to value this – depends very much on Ukranian economy and where exactly the land is.
On top of all this they have investment properties of £21.13m lets round it down to £10m. There are also trading properties worth £24.75m again lets say £10m. This is very conservative as I know there have been sales at close to book value.
There are some liabilities and other assets which net off to a debit of £-7.2m.
So in total we have
Cash $27m £16.35m
Arricano $33 £19.8
Land $33 £20
Investment and trading Properties $33 £20
Liabilities -$11.95 -£7.2.
So a pretty conservative value of £63.6m vs a Market cap of £40.5
Management Fee is $3m per annum – 1.5% gross asset value of the company – creating an incentive for values to be overstated. There is a performance fee of 20% of the increase in NAV over 10% – also 10% of the increase in the share price over £1.08. As we are currently trading at 36p I would be happy to give the manager 100% of any increase over £1.08.
There are also other fees / expenses of approx $2.9m per annum. Though these seem high based on my NAV – as the real NAV is higher this may not be so unrealistic.
The company has announced an EGM regarding a change to the company aim towards a realisation vehicle. Given the 70% loss of IPO investors I would imagine this would be approved.
Fees are also raised if we move on to termination – total of $10m between now and 31 Dec 2018. The Manager also gets 3.5% of any distributions up to $50m and 7% of any above this. To me this seems like too much – how hard can it be to sell some property and distribute cash which is already on the BS ? I dream of the day these crooks stop taking my money.
The shareholder register has 10% held by Lars Ernest Bader – who enjoys some of my other investments. Dragon Capital also holds a fair chunk (17%). Also ELQ investors (15.5) and Goldman Sachs 14%.
Ukraine’s economy is very dodgy as are its politics – part of the reason for the discount.
I hope to make at least 50% on these over the next few years, there a realistic chance doubling my money, more than if I believe the NAV (which I dont).