Eur.Conv.Dev Share Discussion Threads

[greedfear] 30/12/2011 17:13

Happy New Year fellow shareholders!

[chinahere] 23/12/2011 15:38

I have stopped thinking about investing in property for the minute so have ignored it but the info looks good thanks.

Merry Christmas !

[greedfear] 23/12/2011 14:18

Merry Christmas!

[greedfear] 15/12/2011 20:39

So in fact Cascade is not the risky property on the contrary it's the rough diamond that will probably be cut and polished in 2012/2013.

[greedfear] 15/12/2011 20:33

Lol So China is not the issue here.

Sure ECDC is not without risk, hence the share price

Cascade is not as risky as you think.

Beware the numbers below are in romanian lei. To convert in euro x 0.23!

First let's take a look at turnover and revenues. 23 million for 2010. BUT: it was ready on 1/3/10 while 65% was let then. At 31/12/10 81% was let. So ((65+81)2) x 10/12= 61% 23 million =61% let.
Meanwhile 30/6 92% is let. So if that remains till 31/12/11 for 2011 say that on average 86% let. That would imply a 2011 turnover and revenues of 86 x 23 million /61 = 33 million.

I do think that the expenses in 2010 are structural ( opening in 2010). I expect 2011 to be at least break even, but cash generative.

What would be fair value of real estate with yearly revenues of 33 million? Lets be conservative 8 x? 258 million?
Debt is 166 million of that Cascade has 49 million debt to shareholders.
So there are real libilities of 117 million.
Not likely banks will get nervous about that especially as this is a 92% let property.

Let's do the math if Ecdc decides to sell

Value of property 258 - liabilities 166 = 92 million.
Ecdc has a 40% interest in Cas = 36.8
loan to Cas 16.2
Total return. 53 million

Current book value 37 million.

So Cas could in the end have a 16 million higher value then currently accountad for.

As we're talking euro's here 16 million represents 16 x 0,23 = 4 million or so.

So all in all I have no problem whatsoever with valuing this jv + loan at 8.7 million as I think the return will be 13 million or so.

[chinahere] 15/12/2011 17:40

Lol. No reference to China really, just an old name I had used and recycled. I sometimes think I'll change it.

Thanks for the link.

2010 annual turnover 3,985,794
2010 revenues of 19,482,333
2010 total expenses 26,985,479

leaves a negative profit of 7,509,596

Currently the debt and assets look about the same. I wonder what the expenses were for? If they were substantially one-off then this could be good. The 166 million debt must be costing 5% or so I guess.

I think it is risky unless you can be sure of the future profits. They have very little cash for any more expenses. If they don't reduce the expenses and the loans have hierarchy then the banks could easily foreclose from here. They may be able to get all their stake back while the shareholder loans get completely wiped out.

[greedfear] 15/12/2011 17:13

Just being curious: why chinahere?

[greedfear] 15/12/2011 17:12

It's free and condensed but it'll do

[chinahere] 15/12/2011 17:09

No. I haven't bought a single share but I also saw it rise soon after we talked. Have you a link to that Cascade SRL report?

[greedfear] 15/12/2011 17:03

I've seen the Cascade SRL financial report. Makes me wanna buy more ECDC. lol

BTW: are YOU building up a position? Someone is. Not me as I must free up some money. But someone is definitely buying 50,000 each time.

Whoever it is: good luck (not that you're going to need it lol)!

[chinahere] 08/12/2011 23:41

In my limited experience you can't rely on the valuers.

I haven't searched as it's nearly time for bed, but I wonder if we can see inside Cascade SRL as its own company?

The banks will be much more tempted to call in the loan if Cascade aren't meeting the loan costs on time. We also may be able to see the structure of the debt and whether ECDC are down the list.

[greedfear] 08/12/2011 23:25

That's not quite correct.
The assets of 40 million is the number based on historical costs.

The real value of these assets is probably 53 million (that number isn't specifically mentioned but can be calculated) The 2010 annual report states that the 8.7 value of equity could be adjusted higher because of higher value cascade. But let's stick to the 8.7.

8.7 = 4.0 loan + 4.7 for 40% participation
Value of 100% of shares therefor 11.8 million.
Real asset value - liabilities = share value
X - 41 = 11.8
X = 52.8

Question is do you believe the valuators? Value 8.7
Or do you stick to the historical costs as the value. Then 4.0 is to be expected (loan repayment) and the shares have no value.

[chinahere] 08/12/2011 23:02

I can see I should read more!

So just talking about that Cascade Park Plaza, I'm not sure how the ownership is split up? This is my guess from what you have said:

Cascade Park Plaza is worth 40+ million Euros

Cascade SRL owe ECDC 4 million Euros
Cascade SRL owe other shareholders 8 million Euros
Cascade SRL owe external lenders 29 million Euros

As the asset and liability values are nearly balanced, the shares in Cascade SRL could be seen as near zero value currently. (40% of Cascade SRL shares are owned by ECDC).

So on the face of it, if this was sold tomorrow, ECDC would get 4 million Euros back. (I'm not sure whether any loans have preference, perhaps the external lenders do !?)

Does that sound right?

[greedfear] 08/12/2011 20:28

ECDC has lent some 4 million to Cascade SRL, 5.0 million has been paid for 40% of the shares in Cascade SRL.
All in all ECDC original investment (40% shares + loan) were 9.7 million [all kind of costs included]

That original investment of 9.7 million is valued at 8.7 million.

It does look like the liabilities of Cascade (41 million) are close to assets of 40 million.
But of those liabilities around 12 million are shareholder loans.
So the 'real' external loans are 29 million.

[Note: The value of the property of Cascade is >40 million according to an external valuator; see annual report 2010)


That the shareholdings are a security against the external loans is imo of no particular importance. We're talking real estate here so most of the external loans are mortgage loans. Do not pay and the bank will sell the real estate, leaving shareholders with worthless shares.

If banks have the shares as a security too they have a choice. Sell the real estate or sell the shares. I can imagine it's less complicated to sell shares then real estate.

Thank you for keeping me sharp. Appreciate it.

[chinahere] 08/12/2011 19:34

Okay have been reading the last 6 month interims. (I am still interested as the Nav to share price is wide.)

June 2011

p20. Cascade Park Plaza SRL equity is valued at Euro 8,345,000 to ECDC
p21. Cascade Park Plaza SRL Euro 39,995,000 asset and (Euro 41,007,000) liability

It also says that "The Shareholders Cascade Park Plaza and Galleria Plovdiv have pledged their shareholding as security against the external
loans to these companies."

So do I read that as the Euro 8,345,000 is the amount ECDC has lent to the subsidiary? As the entire debt is so close to asset value, that could imply that the subsidiary shares could go to the bank and with their majority, a forced sale may follow. A forced sale may wipe out a large chunk of the asset mighten it ?

[greedfear] 08/12/2011 18:25

Yes, there is a lot of dispute going on. But for every project a SPV is created. So ECDC is never in danger.

Well it's not really a matter of generating revenues. The revenues are generated by the SPV. The only way for ECDC to get cash is the SPV pays a dividend or repay on loans that ECDC gave them. In general loans are repaid once a project is completed. The other way of getting money is to sell their part in the SPV.

I've done quite some research, have contacted management with some questions and was content with the answers I received.

Don't know how long it will take before ECDC gets a proper valuation, but to be frank I wish other shares in my portfolio go bananas first as I want to get as many as possible of these at this bargain level.

I don't know about the brokers. Don't care really.

BOL

[chinahere] 08/12/2011 17:07

Cheers greedfear!

Well, I have investor's fatigue from reading too many reports recently so only skipped through the recent ECDC output. It does look good with several year's worth of cash left and assets that are more built/finished than SPFL plots.

The one thing that sent alarm bells ringing for me is that they appear to have a lot of litigation going on and I fear that a large award against them could finish the company. Is this something you see ?

On the face of it this is a good investment. Looking forward do you see a way for them to get enough revenue to pay for the current cash burn ?

Finally, I see that not all brokers deal in this share. Is this something you have seen ?

[greedfear] 08/12/2011 16:49

Hi Chinahere, welcome on this island of peace and quiet. Haha!

I hope it remains quiet for some time as I intend to build up a position in this very gradually.
Anyway, welcome!

[chinahere] 08/12/2011 16:23

Hello. lol.

[greedfear] 05/12/2011 16:57

You've got it wrong. The discount on cash is >50% ! NITWIT!

[greedfear] 04/12/2011 11:47

Interim report 30-6-2011:

NAV: 36 eurocents
Cash: 6,9 eurocents

[greedfear] 03/12/2011 13:29

Sure real estate investing can be quite depressing these days.
But discounting a share with 90% on the NAV and 50% on the cash per share?
That's a little too much for me.

ECDC invests in office, retail and residential property in Bulgaria and Romania.

Interested in who they are and what they do ?

Have a look ay the company website: