DUPD – free put option on offer ?

Just bought quite a lot more DUPD – at an average price of just over 13p. .

I covered DUPD in a number of posts…

The investment managers Dragon capital have bought 10.69% from J&T Securities Management Limited this means they hold over 30% so need to make an offer at 13p for the rest of the company according to the takeover code.

I have bought as we are awaiting details of their offer.  I strongly suspect it will be higher than 13p, and even if it isnt, given that the bid price is at 13p you can just buy and sell the shares back for almost what you paid – getting a lot of optionality and paying next to nothing for it.

***EDIT 8/6 Offer details out at 13p. Needs 50% acceptances to be valid. Independent directors still to report so still chance they could raise over 13p. Have sold a bit and now wouldn’t add to this…***

https://deepvalueinvestments.wordpress.com/2016/02/05/dupd-it-trading-at-near-cash-value-discount-of-75/

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

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

Figures are laughably out of date but the argument still applies.  This is an out of favour, liquidating investment trust.  I have held it since February last year.

Short story behind this is that lots of money was raised at the top, invested and now we are picking through the remains.

There are reasons to suspect assets could be underpriced on the balance sheet.  Against the market they value their Arricano shopping centre holding at a discount of 70% OK its illiquid but I’m not sure its that illiquid.  They hold lots of little bits of land – near impossible to value as an outsider.  Even if we trust their valuations – which I dont, the company is worth $48m, I also notice on the balance sheet they have a large amount of accumulated losses ($225m), not at all sure as to the position in Ukranian tax, but this might be worth something for somebody.  This suggests losses can be carried forwards indefinitely in the Ukraine…

At the current price the offer is worth $17.62m.  Independent directors to me seem unlikely to recommend accepting an offer for less than 37% of what the company is worth, but I’ve been surprised before…

Further, large shareholders may no longer want the company managed by an investment manager which wants to take it off their hands and the inherent conflict of interest this could create.

Newsfeeds / volume today was very interesting.

Lars Earnst Bader (Hedge fund guy) busy buying all day at 13p went from 10.9% in the morning got to 15% as at close of business.

Other shareholders are Goldman Sachs at 15.5% and Guy Thomas / Hazell Carr Edwards FURB – 3.68%.

I think there is an element of risk on both sides, the investment management agreement expires in December 2018.  As a related party management can’t extend it themselves.  They dont have the votes to delist / do too much else unpleasant. particularly with the nature of the other shareholders, as Ukraine’s largest investment bank its well worth them owning this and equally its not in the interest of other holders to be too unreasonable as they can’t properly monetise it or manage it either….  I would also hope that as a large Ukrainian investment bank they would have a bit of a reputation to uphold so can’t behave too badly…

I strongly suspect a higher offer will follow.

There is some risk here, it is possible for the takeover panel to waive the requirement to make an offer (I dont think they will).  It is also putting money into ukraine – not the most stable part of the world.

My holding has increased from 2.7% of my portfolio to 13% and I am considering upping it further on weakness

*EDIT 8/6/2014 – see comment above, now not as attractive as I thought…

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Alternative Liqudity Fund – adding a touch

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Added a touch to this at 17c last week…

It has done very nicely since I bought – returning 7.5c when I paid 13c for the shares to start with, hopefully the returns of cash will continue..

See original post for investment case…

https://deepvalueinvestments.wordpress.com/2016/08/21/alf-net-assets-6x-market-cap-cash-half-market-cap-potential-5-bag-opportunity/

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Selling DCI – Delay in returning cash / Portfolio update

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Changed my mind on DCI.  This is not to say I wont get back in if the price falls more.

I am getting out more or less flat. Announcement that they are going to use Pearl Island cash for working capital and that:

The Board will re-evaluate the Company’s distribution potential when there is more clarity on the pace of additional disposals.”

Makes me think selling these assets may take a while longer than I initially expected… I’m also more concerned about the price… I always was a bit concerned about the quality of this one…

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Review of 2016 + 33%

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2016 is almost over so I thought I would go through what worked, what didnt and my plans for 2017.

+33% is OK – FTSE100 is up 14%, 250 up 3% AIM all share 14%.  Peak to trough draw-downs across these are about 10% where as my portfolio (OK measured monthly) was only down 5% from peak at its worst.

My review of 2015 is interesting putting this in context.  I anticipated that TRB and SIHL would do well but not that I would come up with other good ideas or that TJI would do well.

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Tau Capital – small but good upside potential (100%+)

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Bought a tiny bit of this…

It is a tiny (£2.1m) investment trust.

It has  $1.4m (£1.1m) in cash (30/6/2016 HY report) – this doesnt screen well as it is held via a subsidiary….

The rest is a 24% stake in Stopharm and a 16.35% stake held via a convertible bridge loan.  This is valued at $6m (£4.8m) in the books based on an indicative offer.  In total this gives an upside of over 150%.  IF we get to NAV.

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Dolphin Capital $DCI – bit fishy but worth a try…

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Bought some DCI a couple of weeks ago at 7.25 – 4.7% portfolio weight.  Picked up more today at 8p – now a 6.8% portfolio weight.  They released an RNS in Mid November – basically selling property and paying down debt.  I thought this significantly derisked the company.  On Friday 2nd they announced an EGM – they are moving into liquidation mode.

They are a resort development company.  They have just sold Playa Grande at 10% below Nav and paid down debt.  They now have a debt to total assets ratio of 18.5%. Factsheet is here.

#EDIT 8/4/2017 – sold out flat – concerned this might take longer than expected – below may still hold though…

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New Investment – Produce Investments Limited – Cheap Potatoes

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Produce Investment (PIL.L) is a vertically integrated potato farmer.  They grow and process potatoes for major supermarkets.  In particular, they produce Jersey Royal Potatoes.

They trade at a forecast PE of 6.  They have a free cash flow yield of about 10%.  The net tangible asset value is about £35m against a market cap of £40m.

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Closed Emergent Capital – 12% loss

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Frustratingly changed my mind on Emergent Capital. original post here.

I’m concerned about debt level / lack of liquidity and the fact the company has 9 months (approx) opex on hand.  I wasnt right about my initial belief red falcon had liquidity available – I’d misread the statement.

There is an opportunity with the strategic alternatives process for this to do very well but re-reading this – the possibilities are not all are positive.  It has also now been over 3 months – should have been done.

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Closed Trump Trades – Frustrating minor Loss

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Just closed all Trump Trades – Short S&P, Long gold / Long silver, Total Loss of 0.45% Total Capital.

Very frustrating to anticipate this correctly then not make any money.  Still it is all experience.  Should have been much quicker in taking profit rather than running and also stayed up to watch conciliatory victory speech / set an alert or limit…

I am amazed market has more or less rallied to where it was the day before following one of the biggest political upsets in the last 100 years.

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