Dawnay Day Carpathian Share Discussion Threads

[hectorp] 10/7/2008 14:50

Mark
thank you for your clear explanation above. I know about covenants, however I needed confirmation that your original quote was that there was sufficient slack or leeway, and its 36% as suggested ( at current valuations etc etc,)

General comment:
I think we HAVE attracted attention of the short side, or an institution offloading in small AT trades.. though I can't prove that .
Its possibly irrelevant anyhow. A shorting day artificialy deflates the share price, not the assets, unless the assets . A short market appearing will increase our volatility. A larger 'bounce' than usual should at some point ensue.
If there is shorting-related weakness of a 10% share price fall, its not marycurer /Papal-power or whoever else, as they don't have the clout to affect the share price of this stock.
- I rest me case.
H.

[jonwig] 10/7/2008 14:25

ew2 - gosh, another visitation!!

BTW, it's Lloyds Bank but Lloyd's of London - you need to watch your GSP.

More to the point, " Banks are bang in the mood for kindness at the moment"
- meaning they aren't.
Can you list situations where covenant breaches in PLCs around this size (£100m) have led to bank action, as opposed to renegotiation?
Banks are far from willing to take illiquid assets onto their balance sheets.

[marycurer] 10/7/2008 14:13

erstwhile2 - 10 Jul'08 - 14:08 - 1668 of 1668

This is not being "shorted",

[marben100] 10/7/2008 13:29

hectorp,

Re covenants: covenants are what must be met for DDC to stay out of trouble with its lenders.

Each property has a specific loan (mortgage) against it. For any given property (on average), the first covenant means that net rental income must be > 110% of the loan interest - or the banks can call in the loan. With a current interest cover of 150% that means that rental income would have to fall by 150/110 - 1 = 36% on average before DDC found themselves in trouble.

Seems like a reasonable margin of safety to me, even in current conditions.

LTV is loan to value i.e. ratio of loan to property valuation, so an LTV covenant of 75% means that the loan on a property mustn't be more that 75% of the property's latest valuation.

The first (income) covenant is easier to check/validate as rental income is fact - valuations are opinion.

Worth also bearing in mind that DDC does have a cash cushion (£60m as at end 2007) so if there were a danger of a breach on any one specific property, DDC could choose to renegotiate and reduce the loan. Not that it appears that any such event is likely.

HTH,

Mark

[edmundshaw] 10/7/2008 13:14

Thanks Mark. Useful.

[hectorp] 10/7/2008 12:56

Mark
thanks also from me regarding your two posts re. your visit to management. Overall I'm very encouraged by the responeses they gave.

I'm not entirely certain how to interpret this sentence and maybe someone can put it straight for me.
"...Covenants on loans: on average, covenants stipulate 110% net rental cover over interest (current average 150%) & LTV of 75-80% (62% at end 2007 per annual report). Lenders much more concerned about the first of these covenants than the second......"
regards
H.

[ilancas] 10/7/2008 12:51

Does that mean someone has cut your nose off?

[silverthread] 10/7/2008 12:39

Thanks for the informative update, Mark. V useful.

[jonwig] 10/7/2008 12:02

Thanks, Mark, for your time and effort passing that back so quickly.

Question still remains ... add, stick or sell???

[marben100] 10/7/2008 11:53

I have literally just remembered a few more important points that were mentioned/discussed:

- DDC's management would like the company to be a REIT if that were possible.

- A move from AIM to the LSE is under consideration.

- Planning laws in many of the countries DDC operates in are relatively lax. There is a concern that overdevelopment could occur but DDC's management states that examination of this risk is part their DD before undertaking a purchase/development.

[nickcduk] 10/7/2008 11:48

DDC could be getting some negative sentiment from the fact Dawnay Day are going to take a huge loss on their F&C position today.

[marben100] 10/7/2008 11:47

Morning all,

Sorry for the delay (been busy with various things). Here are my notes from Tuesday's meeting (I expect to do a fuller writeup/analysis in due course):


- DDC's investors are split 60:40, institutional:retail

- Rent roll this year expected to be £33.5m net rental income (as per annual report). Good progress being made in filling some voids in previously purchased properties. In combination with index-linked rent rises, net rental income expected to be higher in 2009 than in 2008 (barring minor disposals which DDC is expecting to make this year). Current leasing was described as "moderate to good".

- Portfolio comprises a mix of out of town/suburban properties and town centre ones. However, smaller scale of towns in CEE (& hence relatively short distances) means that fuel costs are not a major deterrent to custom. There is a focus on "convenience" shopping which should aid robustness in a downturn.

- There is some liquidity in the CEE property market and properties are currently selling on yields ITRO 6%. It is easier to market properties with a value up to €50m, where loans are available, even under current "crunch" conditions. V hard to obtain larger loans. [I note recent Segro office transaction in Warsaw].

- Dividends: DDC's objective is to pay out all available cash as dividends. 6-7p of this year's dividend is expected to arise from rental income and the balance from gains on asset realisations.

- I enquired about equity & debt budget for development in 2008. DDC not prepared to answer that, however we learned that work is about to begin on two of the Romanian developments, with the rest to begin in 2009.

- Ongoing development projects will be valued based on cost incurred at the year end.

- Covenants on loans: on average, covenants stipulate 110% net rental cover over interest (current average 150%) & LTV of 75-80% (62% at end 2007 per annual report). Lenders much more concerned about the first of these covenants than the second.

- Share buybacks are not practical under Isle of Man law.

- In response to our suggestion, DDC responded that the Board will shortly consider a switch to Euros as presentation currency (which should make performance easier to analyse in the accounts and remove the need for some currency adjustments).

- DDC will try to make analyst reports available to investors.

- Directors cannot currently buy shares due to "insider trading" rules.

- Carried interest is only payable on property realisations and subject to the conditions specified in the admission document.

Cheers,

Mark

[edmundshaw] 10/7/2008 11:36

If you follow Buffett, buy when you see excellent value, and then hold.

To quote him from May "The market timer's hall of fame is an empty room".

[silverthread] 10/7/2008 11:31

Makes sense, sscrabble! Nothing has changed in the fundamentals, and the shares ought to be more attractive as the yield rises with falling share price

So what to do? Either not invest in these low volume shares at all, or hang in for the longer term when value will out, I guess.

[sscrabble] 10/7/2008 11:25

I hold ten different shares and this kind of thing has been happening to every one of them on a regular basis - They drift for a week or two then lose 10% or more on no news and no trades in a hour - I am convinced someone has found a way to make millions by manipulating shares like these - not sure how but maybe something to do with stop losses - they know if they short a stock very quickly and there are no buyers it drops like a stone, stop losses kick in and the shares are then available at a cheap price to make the profit on the short ? - and you can do it with 20 or a 100 stocks a day, so if you get caught by the odd one you are still way ahead.

[ilancas] 10/7/2008 11:03

Convinced from the trades going through that we are being actively shorted today.

[hectorp] 10/7/2008 10:02

williebiz ( couple of posts back) seems to infer that there would be a retesting of 48's. Oh well never mind. I've closed RUS so will start to drip feed more DDC's .

PS
JII looks very interesting ( India) I hold.
H.

[jonwig] 10/7/2008 08:48

H- were some traders caught out by the rally, which seems to have been squashed by yesterday on Wall Street?

Still a bit early for that, I suspect.

[hectorp] 10/7/2008 08:41

O/T
Have closed long position on RUS today. Discussion there says why. I'm very tempted to place the cash right back on DDC. BUt we need this fall to end.
H.

[hectorp] 10/7/2008 08:23

Whats happening to the price.. down 5p. No news?
why this sell volume? strange!

[williebiz] 09/7/2008 19:31

Double bottom then up sez I

[hectorp] 09/7/2008 18:54

Ptolemy, off topic, by coincidence.. see today's RUS news..
no advice. But they could have had you and wolstencroft for less than £80mil!
H.