Dawnay Day Carpathian Share Discussion Threads

[lonrho] 22/8/2008 17:57

This company is looking a bit accident prone,with a supposed net asset value of £1.36 would it not be in our best interests to sell the assets ,repay the debts and give us the proceeds.

[crawford] 22/8/2008 17:46

So the rent roll is safe for another 9 months, I think that is enough breathing space to sort things out.

Like others, the timing of this RNS leaves a lot to be desired.

[jonwig] 22/8/2008 17:43

This is the kind of risk we all knew was there, but - "what hasn't happened yet, won't".

Last week's Economist carried an article about E European economies which almost persuaded me to sell up here. I wish I had. Snippet:

The biggest worry is Hungary, which is the country most dependent on the continuing confidence of the capital markets. A shaky government has done surprisingly well in restoring macroeconomic stability after the near-disastrous spending and borrowing splurge in the early years of this decade. The budget deficit reached a yawning 9.4% of GDP in 2006; Neil Shearing of Capital Economics, a consultancy, reckons it may be down to as little as 3.5% by the end of 2008.

This has come at a heavy price, both in the government's rising unpopularity and in a near economic standstill last year. The economy has picked up a bit since then, but inflation remains troubling at over 6%. The question is whether the government has the stomach for another round of fiscal tightening. Public spending is still over 50% of GDP, the highest in the region. A further worry is the looming slowdown in the richer half of the continent. The Hungarian economy depends heavily on exports to western Europe, which account for nearly 40% of GDP.

And a slightly different 'take' on Hungary's GDP growth:

[aleman] 22/8/2008 17:15

It doesn't need an investment buyer. They are a series of smaller individual properties (rather than shopping centres) that can be sold off to retail or wholesale trade companies.

Hungary's economy looks to be picking up. Traditionally this is the time most struggling companies get the plug pulled so assets can be bought on the cheap (not in the depths of recession as you might think). I have already reported how a number of funds have been set up to make purchases in this sector - with cash already raised.

[hectorp] 22/8/2008 17:08

humph! The eloquent yddrf knows all the answers as usual. However as stated above the company has 9 months to find a new tenant /buyer (?) either? .
- But bad timing also stated above, before the long weekend.

[ydderf] 22/8/2008 17:02

Now you know why there is a large discount to nav - without a tenant, (if the largest cash and carry operator can't make enough to pay the rent, why should any other successor operator be more successful?) as valuations (see 2006 statement) are clearly based on income, without income no investment buyer could raise finance to buy it, so the market value will be substantially lower than he aquired cost. This will apply to most of the other properties. This eloquently illustrates the difference between mature and emerging property investment markets imho - there is no depth to the investment market, presumably the native buyers would laugh at the valuation - why was it sold anyway? Without a western european buyers there is effectively no property investment market anymore - oh and forget the divi!

[edmundshaw] 22/8/2008 16:59

One possibility is that someone will come in and take on interfruct's business.

However, Hungarian economy is weak at the moment, so this is perhaps unlikely...

[edmundshaw] 22/8/2008 16:57

Negotiations with a strategic investor to bail out troubled cash-and-carry retail chain Interfruct failed, the retailer announced. It explained that the investor pulled out of the talks, but did not provide reasons for the failure of the potential deal.

(date: 11th August)

[kimboy2] 22/8/2008 16:55

Aug 12, 2008 (New World Publishing via COMTEX) -- DDCPF | Quote | Chart | News | PowerRating -- Instructed by its owner, Calslane Holdings Limited, Hungarian Cash-and-Carry chain operator Interfruct Kft is about to lay off 700 employees, the company announced. The reason for the dismissals is that an expert investor withdrew from cooperation with Interfruct some days ago. In case the company manages to find a new business partner for its restructuring measures, and stabilize its operation until September 30, the company will not perform the cutback on its stuff. With the new investor, the company would have closed down 10 or 13 of its stores. Employment centers have already been informed about the layoffs. Distribution chain Cash-and-Carry was sold by Tengelmann Group to SCD in 2005, October, but in 2008, the company was purchased by Calslane. SCD also sold Interfruct properties to the British investment fund manager, Dawnay Day Carpathian Plc, while it also signed a leaseback deal for the properties for 15 years with Dawnay.

[edmundshaw] 22/8/2008 16:46

Cannot say I am impressed at the timing of the announcement at 4.13 on the Friday before a bank holiday. The day might have been unavoidable, but the time of day is awful.

Of the 5 Budapest sites (out of 23), the 2 sites on the Danube should be worth a bit with any luck. The others I have no idea about yet.

For a geographical view, try this link:

...and press "Aruhazaink" for store locations.

[kimboy2] 22/8/2008 16:41

They in effect have 9 months to sort out another tenant or sell if they wish before income is affected.

I wonder if they have similar bank guarantees on all their properties. It would reduce what i envisaged the risk profile was.

[hectorp] 22/8/2008 16:39

We will all need to discuss this further , A. Lots to talk about from that RNS, some of it I found quite misleading.
I get the impression DDC is very tied in with this Interfrucht lot.
- Why would they default on rent?
are they in serious financial trouble? who can tell, but a lot can be inferred especially in this climate.

[aleman] 22/8/2008 16:34

Looks like a series of small properties that could be sold off separately. Might not be so bad as I was suggesting some sales could accentuate the discount to NAV and reduce gearing.

[edmundshaw] 22/8/2008 16:28

Some history:

Dawnay Day, Carpatian PLC - General - Hungary, €82.5m Acquisition of the Interfruct Portfolio in Hungary
Date: 08 Nov 2006

Dawnay Day Carpathian PLC ("Dawnay, Day" or the "Company") is pleased to announce that it has acquired a portfolio of 23 Interfruct properties in a sale and leaseback deal from SCD International Ltd, for a purchase price of €82.5m representing an initial yield of 7.80%, net of acquisition costs. This acquisition represents the tenth transaction by the Company since the IPO in July 2005.

The 23 cash and carry stores are located in Budapest and major regional cities throughout Hungary, and have a total gross lettable space of 105,000 metre sq. The stores are let on new 15 year leases to Interfruct kft, Hungary's largest cash and carry retailer, at an average rent of €5.00 per metre sq per month. The properties are situated on land plots totalling 345,000 metre sq, several of which offer development potential in the longer term. On one of the sites in Budapest, which overlooks the Danube, terms have been agreed with the tenant to explore shorter term development opportunities.

The portfolio is being purchased in 2 phases, with the first phase of the purchase comprising 17 properties, financed by equity of €49,5m, having already completed. The additional properties will be transferred to the portfolio on or before 30 March 2007 once the vendor has fulfilled a number of conditions. Dawnay, Day expects to refinance part of the equity used for the initial purchase within the next 6 weeks.

Commenting on this announcement, Rupert Cottrell, Chairman of Dawnay, Day Carpathian said: "This is an excellent transaction, which adds a large portfolio of property assets with a well established tenant and has the added advantage of providing potential development opportunities. Today's announcement also represents the fund making good progress towards meeting its investment targets for 2006."

[aleman] 22/8/2008 16:25

11 months rent is guaranteed, payable next month. How long does it take to clear the buildings and get someone else in?

Interfruct properties account for about 10% of asset values if you assume a little growth on development portfolios. Could be a touch less with recent acquisitions.

[aleman] 22/8/2008 16:22

Date: 22 August 2008
On behalf of: Dawnay, Day Carpathian PLC
For immediate release

Dawnay, Day Carpathian PLC
("Carpathian" or the "Company")

Carpathian, (AIM: DDC) the retail property investment company established to invest in
Central and Eastern Europe, notes the financial
position of Interfruct Kft. ("Interfruct") as set out below, one of Hungary's largest cash and
carry retailers, and the tenant of 23 of
Carpathian's properties in Hungary.

Rent arrears of two months' rent in respect of Interfruct have arisen, as a consequence of
which, with the consent of Carpathian's
secured debt provider, Anglo Irish Asset Finance PLC ("Anglo"), all of the leases have been
terminated with effect from today and the
tenant's bank guarantee of EUR 6.4 million for 11 months' rent (including the existing rent
arrears), which is expected to become fully
payable within 30 days.

The 23 properties leased to Interfruct have an annualised rent roll of EUR 6.7 million,
representing approximately 14 % of the Company's
total annualised rent roll. In 2007, these properties contributed approximately EUR 1.7
million or approximately 8 % of the total Company
profit after tax.

The Company had invested 8% of its equity in the portfolio, which represents approximately
12 % of the gross asset value of the entire
portfolio as at 31 December 2007. Steps have been taken to draw upon the tenant's bank
guarantee, which provides coverage for the equivalent
of 11 months' rent (including the existing rent arrears).

A number of options are being actively explored to mitigate the potential loss of income
(once the tenant's bank guarantee has been
exhausted) and to preserve capital value. In the meantime, an agreement has been reached with
Anglo to appoint an international sales and
letting agent to work with the portfolio managers to identify and implement the optimal
strategies for the re-letting and / or sale of the
portfolio, whether as a whole or individually or in sub-portfolios. Discussions between
Carpathian and Anglo regarding the restructuring of
the existing loan facility are continuing to take place.

[nickcduk] 22/8/2008 16:21

Today's news doesn't inspire confidence in the quality of DDC tenants. Could face a bout of selling pressure ahead. Could present a short term trading opportunity.

[crawford] 22/8/2008 14:56

Yes, most of my small caps up today as well, a refreshing change.

[aleman] 22/8/2008 14:25

DDC ticked up now so has joined in a bit later than other yielders. (Don't know what ADVFN's feed is doing showing a fall.) All my small cap yield shares are flying today. Could be best day for a long time.

[aleman] 22/8/2008 14:09

Euribor rates are creeping down. 12-month rates were 5.30% yesterday from 5.43% a month ago.

[crawford] 22/8/2008 13:46

Aleman,
agreed, should only help stocks like this.

[aleman] 22/8/2008 12:37

Poor UK GDP numbers have hit interest rate futures. The prospect of a 0.25% rate cut in November with more to come next year is causing savings rates to start to fall. The stockmarket is up as investors look for somewhere else to put their cash. Surprised DDC has not moved up yet with its generous yield in an evironment of weakening interest rates.

[hectorp] 21/8/2008 12:33

Volume here now rather weak historically. The share is drifting but with no real direction. I polite term could be consolidation . Even so, at the current price, yield would be a very encouraging reason to be holding.

[aleman] 19/8/2008 13:53

Not necessarily. Money supply growth is generally much the same as lending growth and is a coincident indicator. It reflects economic acivity now, unlike consumer price inflation indicators or unemployment which are lagging. (Prices go up over time in response to the extra demand the new money brings and employment is cut in arrears once the fall in orders proves not to be temporary.) Ambrose's LSR M3 chart would be good news if it now levelled out, showing money supply and hence inflation under control and not collapsing. It would give more flexibilty on interest rates with scope for another cut. That is why I was cynical as it would be rather fortunate timing ahead of a US election. My gut instinct was that the John William's chart was reflecting the reality until the recent commodities fall and $ strength. Now, I'm less sure but evidence of manipulation of markets still leans towards the latter where the higher level of annual M3 growth suggests the US Fed doesn't have rate flexibility without damaging the $'s prospects. I hope Amrose's chart and view proves near the mark but experience has taught me to be cynical.

The Federal Reserve don't give two hoots about the banks - except the ones that are their shareholders, and that is hard to uncover. Why is it such a secret? Goldman Sachs and Citibank tend to get big mentions as do JPMorgan, who were given a load of Fed money to "rescue" Bear Stearns after its shares were shorted to death to undermine confidence. Arguably the Fed encourage boom and bust so their big bank shareholders can acquire the small banks on the cheap when market share would prevent such takeovers in normal times. Concentration of power in fewer and fewer large corporations is leading us to a sort of market socialism which isn't healthy in the long run as it takes money from the poor and gives it to the rich. Funny how Blair and Brown have done nothing to stop this trend and Blair now has a directorship with JPMorgan.

[lord gnome] 19/8/2008 12:30

Interesting analysis Aleman - I agree with you about conflicting information. We are wading in very muddy waters.
FWIW, I guess that your lower graph would look a lot different if financial assets were written down on a mark to market basis. I can't see central banks inflating any more than they already have to try to save them. I think that a lot of value has been writen off for ever.
If Ambrose is correct, we certainly seem to be in for a period of contraction and deflation - or am I reading it wrongly?