DUPD – IT trading at near cash value, discount of 75%

Posted on by rjmahan

Just bought a 5% portfolio weight in Dragon Ukranian Property and Development.

The Market Cap is $23.7m.  It holds $16m in cash / recievables making this a pretty solid bet.  It holds $54.8m other assets which it is trying to liquidate.

The only problem is that its based in the Ukraine….

I have owned this a number of times over the years.

https://deepvalueinvestments.wordpress.com/2014/01/23/dupd-beginning-to-realise-but-price-not-rising/

https://deepvalueinvestments.wordpress.com/2014/01/27/dupd-he-who-turns-and-runs-away/

It looks like I was right to sell at 35c as it has fallen to 16c although a dividend of 3.5c has been paid.

A dividend of $6m has been announced – or 5.4c per share  Even after this there is still at least $10m on the balance sheet.

Sales in 2015 were apparently ‘record’.  This may sound surprising but there have been refugees moving from the conflict in the east.  In addition, with Ukraine’s economic difficulties property is probably a better store of value than the local currency…

Most of DUPD’s property is in the East far away from conflict areas.

One additional holding which may be of interest is DUPD holds 12.5% of Arrianco – at Arrianco’s market cap this is worth $7m but DUPD have it in the books for $1m.  Arricano is a mall operator.  Its AIM listed but very thinly traded – it’s arguably cheaper to buy Arricano by buying DUPD than it is to buy Arricano.

I am a little concerned by the prospect of capital controls but DUPD’s assets are structured as loans to operating companies – allowing them to bypass restrictions on transfers out of the country.

When DUPD paid a similar dividend in 2015 the share price didnt respond to the declaration on 29th December, it spiked slightly before the dividend x data before remaining where it was.  I hope something similar will happen this time – which I believe indicates investors are valuing the company based on the total NAV and not the cash in the company.

Shareholders are respectable – Nominees, most likely hedge funds own lots – Goldman own 15.5%.  Top 9 holders have 75.6% so will hopefully prevent management stealing…

Fees are not too bad at $2m a year.

 

Brief dealing tip – this is listed on ISDX as well as AIM so you can buy at the bid and sell at the offer – well worth doing with a 10% spread.

 

Published by rjmahan