Downing Strategic Micro-... Share Discussion Threads

[makinbuks] 28/12/2023 08:36

Agreed, also "...whilst also remaining open to any alternative options for the future of the Company that merit consideration" is a come and get me signal albeit tempered by the statement that the good progress has been limited only to the advice from advisors

[888icb] 28/12/2023 08:29

This is particularly interesting:
“ the Board notes that bids for portfolio companies continue to be made at premiums to their share price.”
This must be a very real possibility for that statement to be included in the RNS and would accelerate the return of capital. January is going to be exciting.

[weatherman] 28/12/2023 08:18

28 December 2023

As announced by the Company on 9 November 2023, the board of directors of the Company (the "Board") has been considering the best means by which the Company can meet its commitment to return capital to shareholders and had concluded that it would advantage all shareholders equally if the Company were to commence a managed wind down of its investment portfolio. The Board has worked closely with the Investment Manager to determine an appropriate managed wind down strategy and is of the view that within the first six months of 2024 up to or exceeding 50% of the Company's current market value can be returned to shareholders in cash (current bids for investments assumed to complete by then) with more than the remaining portfolio market value still to be realised through the process of complete wind down.

The Board continues to consult with its advisors on the most tax efficient method of returning capital to shareholders pursuant to that wind down, whilst also remaining open to any alternative options for the future of the Company that merit consideration. Good progress is being made on the former, and the Board notes that bids for portfolio companies continue to be made at premiums to their share price.

The Board expects to update shareholders further by mid-January 2024."

[cousinit] 20/12/2023 17:40

Have nibbled back in for that reason, River. Whilst (almost) everything has gone gangbusters after I sold down, this slipped on the RGD debacle. The newsletter did imply that they may get something back from the Administrator, but not clear if that has already occurred with the NAV having nudged up a bit in recent days.

[riverman77] 20/12/2023 16:58

Could be interesting again now that RGD holding has been written down - the rest of the portfolio looks pretty good and on a 15% discount. As long as they can take their time to realise their assets and not have to do any forced sales, this could be a good way to play a recovery in UK small caps. The obvious endgame would surely be for this to be taken over by another fund.

[makinbuks] 19/12/2023 12:46

The newsletter is almost casual about it. 12% NAV decline "really disappointing....after years of support", This is Judith Mackenzie's personal baby and she should take full responsibility.

[frazboy] 29/11/2023 18:14

Yes, a 10% NAV reduction required a bit more than a one paragraph addendum.

[weatherman] 29/11/2023 17:10

Full provision ? the £2.3m is less than full value of loans stated in accounts - maybe some are more secure than other? An orderly wind down? - I hope they seek to max their investments by selling at the top of the economic cycle, not the bottom.

[riverman77] 29/11/2023 16:44

That's bad form to bury that within what looks like a routine NAV udpate. As I said before there is defitnely some downside risk here!

[frazboy] 29/11/2023 16:03

RNS which everyone seems to have ignored:'an announcement released by Real Good Food plc at 4:38pm on 28 November 2023, the Board has reviewed the valuation of the investment in Real Good Food plc and has decided to make a full provision (previously valued at £2.297M). The Board has also reviewed the valuation of the investment in Tactus Holdings Limited, in view of its recent trading performance, and decided to reduce the valuation to £200K (previously valued at £829K).'

[weatherman] 28/11/2023 18:52

Another company in DSMs portfolio, JNEO, has issued a profit upgrade today.

[cousinit] 28/11/2023 18:25

The key will be how attractive a 'clean' Renshaws is to trade buyers and if there are several bidders to drive a competitive price. Not close enough to judge. Christmas does seem to be a key sales driver and so unlikely a new buyer will be able to do anything about the volume constraints in time to make a difference this year

[weatherman] 28/11/2023 18:01

Exposure to Real Good Foods is about £4.3m, mainly loan notes, stated inclusive of accrued interest, with 75,000 GBP in shares. Administration should mean some protection for the business while a sale of assets progresses - they may get back a good percentage of the loan, possibly lose the unpaid interest. RGD has loans of approx £31m, for a business that has made several million in EBITA in the past.

[cousinit] 28/11/2023 17:23

I did sense that this would be the direction for RGD after the announcement a week or so ago and sold about 75% of my DSM holding, given the discount wasn't huge with the NAV vulnerable to a haircut. Seems strange that the wheels finally fell off so quickly at RGD given just a few weeks ago they were hailing a turnaround. Definitely a case of gradually then suddenly...

Does seem to be a very tough trading environment. Balance sheet strength key in the near term.

[topvest] 28/11/2023 16:58

Real Good Food going into administration. Downing really have been a poor performer. Will they get anything back on the loan notes I wonder? Over 5% of the portfolio up in smoke otherwise! Now is the time for Harwood to muscle in, if they are interested.

[riverman77] 27/11/2023 09:53

JMI looks fine although just to note that it seems to be more mid caps than small caps. Rockwood invests in very specialist companies (turnarounds, special situations etc) which I probably wouldn't hold myself as too complex to analyse. They also have quite an activist approach, eg getting on boards or being involved with fund raisings. Therefore a good way to hold a basket of these sort of names, and their track record is pretty exceptional so they appear to know what they're doing!

[donald pond] 26/11/2023 20:57

JMI always fairly safe and the merger with JMF may add value. Rockwood is a strange one but pretty good imo. If you subscribe to stockopedia there's a very good interview with the manager there. He goes through his biggest holdings and why he likes them. It explains his approach very well

[riverman77] 26/11/2023 20:49

Depends if you're after a fund or individual stocks. For funds Rockwood and Oddysean investment trusts both look good, and DSM itself not a bad choice. Personally prefer individual stocks and an awful lot to choose from right now - some of my favourites include STB, HAT, RFX, VTU, LIT, AUGM and CARD. More recently picked up a few KITW and KGH. All look solid businesses and exceptionally cheap.

[skyship] 26/11/2023 15:45

riverman - always respect your opinion, so if I might ask, where would you allocate for a small exposure to the UK small cap sector?

I've been looking at various small cap funds; but no idea which one to plump for - if at all!

[red ninja] 26/11/2023 13:58

Aren't Downing managers talking about a potential 50% upside, but that is not certain and the time span is not yet revealed.

[riverman77] 25/11/2023 19:49

It's only on a 15% discount so not sure how this equates to 50% upside. There are no doubt some undervalued companies in their portfolio (HSP and RFX in particular) but no guarantee these will be sold for what they're actually worth. Yes, if we see a market rally then DSM will probably deliver a c50% return, but that's probably true of most small caps. Certainly don't think you can say there's no downside risk, and let's be honest they do hold a few ropey companies alongside the good stuff.

[888icb] 25/11/2023 18:08

There’s a fund that are an existing shareholder adding another 1% to their holding taking them above 5%. They understand this is a no brainer to get a 50% upside over the next year or so with cash dividends paid out and essentially no downside risk.

[red ninja] 25/11/2023 12:00

MIGO Opportunities Trust plc up their state in DSM to 5.15%

[makinbuks] 18/11/2023 17:23

I really question the competence of the management of RGD with such a marked change in tone from the 31st October AGM update to yesterdays announcement. I assume our manager who is close to the situation would not accept any deal that didn't result in full repayment of our loans. Given the significance of this to NAV, I'm disappointed DSM haven't commented

[red ninja] 17/11/2023 16:32

I think there is more chance of a sale, not possibly at the best price, but a sale price the shareholders could live with.

Mike Holt, Executive Chair, said:

"We have made substantial progress over the last year. The radical reform programme has delivered significant benefits and recent senior management changes have also made a real difference. The Group, however, is struggling to meet demand through supply issues and cash constraints. The Board together with JF Renshaw is exploring all possible options and is working closely with Interpath Advisory to determine the best way forward."