Doric Nimrod 3 Discussion Threads

[robizm] 16/4/2020 15:40

Amedeo who received cash of £130 million for two planes sold in Feb 2020 has cancelled their dividend yet these are still paying out. That few million in dividends may be needed in the future.

[rik shaw] 16/4/2020 14:45

Declaration of Dividend

In line with the distribution policy the directors of the Company have declared an interim dividend of 2.0625 pence per Ordinary Preference Share in respect of the financial year ending 31 March 2020.

This dividend will be payable on or around 30 April 2020 to holders of record 24 April 2020. The corresponding ex-dividend date will be 23 April 2020.

[sf5] 16/4/2020 10:22

Indeed, this doesn't surprise me at all, despite some here suggesting that as a state-owned carrier Emirates would be the last to seek to reduce its lease commitments. Question is, can Doric seek some corresponding concession from its lenders - there was $193m of debt at 31.12.19? To my mind this is fundamentally little different to the high street commercial property space - all parties somehow have to share the pain to ensure survival in some form. Who has the strongest negotiating hand - I don't know?

Investing.com was showing a share price of 34p a moment ago.

[irishmatt] 15/4/2020 21:34

I would expect it's the same letter gone to all leasing companies, just AA4 are a bit quicker to update, they were much quicker to update re Thai airways than DPA were previously for example

[lonrho] 15/4/2020 21:19

You may well be right but maybe Emirates are following Thai airways in wanting to get their hands on some of the 130 million surplus AA4 got from selling the two A380's to Etihad.

[irishmatt] 15/4/2020 21:05

Emirates asking AA4 for "some form of financial accommodation" so Doric will have been contacted too no doubt, I would expect an RNS shortly saying as much

[irishmatt] 14/4/2020 20:34

Market makers now playing with the spreads ha

[rambutan2] 12/4/2020 20:14

It crossed my mind that passengers/authorities might demand seats be spaced out a bit more post Covid. If so, would suit bigger planes?

[riff1954] 12/4/2020 20:04

Interesting opinion on DPA, a similar vehicle to the DNAs, that suggests there may be a future in these shares after all

[irishmatt] 12/4/2020 10:16

Agree that is why I am not that down on A380s, they work well for the hub terminals with limited take off and landing slots. Emirates has loads of them so would look pretty stupid (and lose a lot) if they did a U turn on using them

[grahamg8] 12/4/2020 05:02

At the time I hadn't thought much about about the similarity of the possible end share value. I was just pleasantly surprised that they did come out fairly similar, and I promise there was no manipulation of the criteria. I only did the calculation once and that was what resulted, 86p or 93p.

There is some logic to this though. If I was an entrepreneur with the odd $100m burning a hole in my pocket. Then I might see an opportunity to buy up spare planes from the lease company and rent them out to cash strapped airlines. If I let a few shareholders in on the deal with a return of 8%pa they could be pretty happy and I would have no net outlay at all. Oh and I would have reinvented DNA, AA4 and DPA.

For those who can't see a future for the A380 remember that there is a shortage of take off slots. Heathrow was Emirates most profitable route with a load factor of over 90%. Big planes can fly full.

[irishmatt] 10/4/2020 11:07

So we are looking at similar end values then. I liked DNA1 also but can't get placed inside the spread. Hadn't given too much thought to regearing the lease (and then debt would all be gone) but yes that's an option and by then the world should be a much different place than right now.

[grahamg8] 10/4/2020 08:35

Irishman that is the $64,000 question that we would all like to know the answer to. DNA, AA4 and DPA all work in pretty much the same way. The rent pays the loan interest and capital, any surplus is paid as dividend. So the liquidation value is more or less the value of the planes at the end of the lease. As I mostly hold DNA1 I have done the calculations for this because it is of most interest to me, and also the simplest as they only have one A380.

The spares value of an A380 has been put at $45 to 80m, and with 42.45m shares in circulation at the current exchange rate this is 86pps+.

Of interest is an attempt to value a follow on lease. I found a reference (ed: in my historic notes) to a Bloomberg report which said an old A380 should lease for around 40% discount to a new lease. Assuming Emirates have buying power I have taken the discount at 50%, current rent is £15mpa less expenses of £600k. So the new distributable income would be £6.9mpa. My reasoning said allow an 8 year lease, 8% discount rate, no residual value. An annuity on these terms gives a present value of 93pps.

Plenty of assumptions so it's easy to shoot these figures down. Similar calculations can be done with the other lease shares. DYOR.

[robizm] 09/4/2020 22:17

I had bought the 3 dna and dpa and aa4 just under 2 weeks ago. I sold out all bar dpa (the spread). And have got 40000 dpa shares as profit. I moved 90% into gold silver and property as all I can see is our old friend inflation returning in a bad way. If I am honest I think I sold to early but I have never seen a situation with the markets like this and have no confidence in the markets anymore.

[irishmatt] 09/4/2020 20:27

Graham what are you guesstimating for liquidation value?

[sf5] 09/4/2020 18:55

Yes, encouraging first buy by the newish NED Miss Proctor. Am a bit surprised she's allowed to buy just a couple of days before the quarterly report is due. Possibly it was sent to the LSE late this afternoon for release Tuesday morning? Possibly it won't say anything meaningful/price changing? I'm not familiar with the story at DPA but assume it's the Norwegian Air connection that made the price crater last autumn.

"August 19, 2019 • Doric III
DORIC NIMROD AIR THREE LIMITED (the “Company”;)

Appointment of two non-executive directors

The Board of the Company is pleased to announce the appointments of Suzanne Procter and Andreas Tautscher as independent, non-executive directors of the Company, such appointments being eligible for re-election at the next annual general meeting.

Suzie brings over 37 years’ experience in financial markets, with specific expertise in asset management. Suzie was previously a non-executive director of TR Property Investment Trust plc, an investment company listed on the FTSE 250 index. Her executive roles included Partner and member of the Executive Management Committee at Cantillon Capital Management LLC, Managing Director of Lazard Asset Management, Head of Institutional Sales at INVESCO Asset Management, Director and Head of Fixed Income Business at Pictet International Management Ltd and Head of Fixed Income at Midland Montagu Asset Management. Suzie is resident in the United Kingdom."

[grahamg8] 09/4/2020 18:03

Tried the inflated 40p for DNA but order not filled. Eventually settled for some DNA2 at 72p. Dividends plus liquidation value (by the way that's liquidation of DNA when lease ends not Emirates) should bring in a nice return.

[irishmatt] 09/4/2020 17:53

Agree, they bought across all the DNAs

[rik shaw] 09/4/2020 17:52

Reasonable sized Directors purchase indicates some confidence in the value here.

[irishmatt] 09/4/2020 17:52

Agree it's a good thread and thanks for your comments

It was Etihad not Thai that bought the planes but still it's a good sign. Agree with your logic on the A380s too, Emirates needs to make it work with them as they have so many. Plus for airports that it's difficult to get take off and landing slots (Heathrow, Dubai, HK etc) the A380s work well.

DPA just got the same news that AA4 had in that Thai are committed to their obligations but need some help. I would envisage that "help" will mean they end up paying more but just less in near term. Hence why divs have been stopped elsewhere.

Value proposition pretty clear here, 40p a share (least it was this morning, has now moved up to having to pay 44p or so, with directors buyig across all the DNAs), cash on balance shet of c6p a share, divs of c38p over life of leases as currently stand to 2025 (ignoring the retained earnings each year) and then residual value of the planes which I put conservatively at 50p per share. Others will say higherbut I'm going wiht part up value at £30m($45m and a conservative exchange rate back) each plane

Seems to stack up well. The thing to get comfortable with is people flying again in future (I'm happy with that) and that Emirates are a good credit (given state backing I'm good with that too). Note the Emirates bonds did blow out but still only yielding c 6.5% to maturity for a similar term to this play. So I certainly would prefer to buy this rather than a 6.5% bond to take Emirates risk

For what it's worth I think the value propostion on DNA2 is slightly better overall than here (or DNA1 if you can get well inside the huge spread, but I can only get offers at 40 or 45p)

[grahamg8] 07/4/2020 18:26

What a joy this thread is allowing views to be expressed without incurring a troll storm. We live in uncertain times to be sure. For Thai Airways to buy 2 planes partly supports my earlier post. They must have struck a good deal to agree to part with cash just when planes have been grounded all over the world and presumably their income stream has been decimated. There were suggestions that Emirates might bin their A380's and buy smaller planes. I take comfort from the H1 report of 22 November which discussed in quite a lot of detail Emirates plane purchase programme. What struck me was that they seemed to have quite a lot of indicative orders but were cautious over making a firm commitment. So it seems that cancelling new plane orders would be possible. Good for Emirates, not so for Airbus, Boeing, Rolls Royce, Pratt and Witney etc.

If the A380 fleet were grounded the planes would be completely worthless, so Emirates would have a massive asset write down. Where are they supposed to find the money to buy new smaller planes? Surely the easier option is to keep the existing planes flying. That to my way of thinking means the rental payments are secure although I would concede that the sell on value is likely to be reduced at least in the short term.

It was I think also suggested that Emirates would walk away from the rental commitment and effectively hand the planes back to DNA. This sounds nonsensical unless the airline went bust which I can't see the UAE government allowing to happen. The leases are legally binding. Regardless of whether the planes go anywhere. DNA could still demand their rent. The win win solution is extending the lease with or without a buy package tagged on. DNA shareholders breathe a collective sigh of relief and Emirates conserve cash and restart flying later this year.

[robizm] 06/4/2020 14:53

I bought for the same reason and also have some dna and dna2 for the same reason also dpa and aa4. I only bought Thursday so have not held long but glad the dividends have been stopped as the more cash they have the better. Just need covid 19 to finish now but don't know when flights will be back to normal if ever.

[dlm2602] 06/4/2020 13:37

Well I bought this morning for my ISA. Last week, the government of Dubai said they would stand by their national carrier.

hxxps://www.hoteliermiddleeast.com/business/116703-government-to-support-emirates-airline

On a separate note Amedeo, who are a similar company to DNA3 announced that they had sold 2 of their A380 aircraft back to the lessee airline - Etihad, The price was £130m net of all costs, lease commitments and payments of debt. These aircraft are a couple of years newer than those held by DNA3 but assuming a further 20% age discount, this would give a value for the 4 aircraft of around £210 or 95p a share.



Today in an RNS, Amedeo said they were suspending dividend payments to conserve cash, but this seems to be mainly due to the fact that Thai Airways has asked the company for assistance. Thai airways has leased 4 A350's from Amedeo and although the airline has said it is the national flag carrier and expects to meet its obligations.



In my view, I think the reward is worth the risk. The future dividend payments will more than cover the initial purchase cost of the shares and final payment will be a bonus.

[riff1954] 06/4/2020 10:53

Be really surprised if any of the Doric distributions were paid In the near future.

[sf5] 06/4/2020 10:15

Thanks - that's reassuring, I'd had the impression it was just a majority stake. Interesting to see AA4's suspension of distributions this morning - down to uncertainty on their Thai lease payments it appears. I used to think they were a safer bet given their diversified asset base but can't take anything for granted in these extreme times.