Duke Capital Share Discussion Threads

[bwm2] 16/2/2021 19:53

RogerRail
This type of acquisition of a SME is not fundable by bank debt. Banks' appetite the lend to quality SME trading companies to fund their business needs is as dire as ever never mind funding the purchase of goodwill. This target "Fabrikat (Nottingham) Ltd" last accounts were to Dec 2019
Sales £12m
Op Profit £1.1m
Int (£22k)
PAT £960k

FA £1.2m
Cash £940k
NCA £1.7m
Bank debt £320k
Hire P £274k
NA £2.4m

No rent, minimal directors fees £47k inc pension, minimal debt, dividend £518k

Solid company, the likes of which are the backbone of this country.

[sharetips] 16/2/2021 19:33

Tipped in cityconfidential again

[rogerrail] 16/2/2021 11:41

Thanks for the clarification, makes sense.

[riverman77] 16/2/2021 11:17

Remember the 14% includes both interest and capital repayment (the borrower doesn't need to make a final repayment as they would in a traditional loan or bond). If you strip out the capital repayment element it's probably around 8-9% which seems fair for a very long dated loan to a small, private business.

[rogerrail] 16/2/2021 08:54

New investment announced today with initial yeild of 14%. I don't quite understand why any business would take on such expensive debt when interest rates are so low and there is availability of gov't handouts to businesses?

[btgman] 16/2/2021 08:49

Excellent news further points to a 10% return, with the additional 30% equity stake as a real added bonus

AIMHO
GLA
BTG

[jimtech] 14/2/2021 11:06

Absolutely. I first bought in June last year at 29p. I have considered selling but the dividend is a considerable attraction. There is still potential for a return of share price to pre-COVID levels IMHO.

[btgman] 11/2/2021 14:21

I think they have scope to increases dividends effectively making this a 10% annuity with some capital upside
AIMHO
GLA
BTG

[btgman] 11/2/2021 13:45

The math's behind current share price and potential for Duke to increase dividends from 0.5p per quarter makes this quite compelling

The timing and cycle of where they are at with their portfolio of assets is similarly intriguing.

One to tuck away
AIMHO
GLA
BTG

[johnroger] 08/2/2021 13:09

Sorry to see you go Stevie and thanks for all the info.

Bruce Packard commentary for Sharescope

"This royalty lender put out a trading statement saying that revenue for Q3, ex the disposal of Welltell (one
of their portfolio companies which has been sold for £15m) would be £2.5m. They expect Q4 revenue to
be £2.5m too, despite the sale of Welltell which generated £0.45m per quarter. So £5m for H2 to 30
March, v £3.6m H1 and a negative revenue figure in the same period last year.
Net debt currently stands at £5.6m, a substantial improvement on £15.5m net debt at the end of March
last year. Of the £15m received from the sale of Welltell, £6.2m has already been lent out again in 3 follow
on deals.
Broker forecasts Cenkos, their broker, is forecasting total income of £10.8m FY March 21F, though it’s
not clear how they are treating the one off gain from the sale of Welltell. Cenkos is then forecasting that
total income only grows 3% for the following 2 years, and adjusted EPS stays flat at 2.2p FY Mar 21F and
22F, before rising to 2.6p in FY Mar 23F. That puts the company on 10x PER March 23F. Cenkos is
forecasting a dividend of 2.0p Mar 21F, growing to 2.2p Mar 23F, which is an eye catching 8% yield. I have
pointed out previously that this is not a typical yield stock paying out excess capital, Duke has in the past
needed capital raisings to fund growth. So management are paying out a dividend with one hand, but have
a tendency to ask for capital back with the other hand.
Opinion Given that total income is a mixture of one of gains on sale, fair value adjustments, impairments
and interest income it’s hard to understand the moving parts without seeing a full p&l, cashflow and
balance sheet. But the RNS suggests at least things are going in the right direction. I think that
miscellaneous financials (Equals, Cenkos, maybe even Funding Circle) could be a good way to play a
recovery. Duke Royalty fits that profile too."

[stevie blunder] 08/2/2021 10:08

I have sold out of these today, it was never more than 1.5% of my folio and I have taken the hit.
I was initially attracted by the Royalty model because of the similarity to mining royalites.
However it has become clear that the differences are quite significant. Some of these differences could be interpreted as strengths but they dont seem to be playing out that way:

Firstly the cap and collar on the payments limit the upside for Duke, while burdening the borrower during a downturn.
Second the ability of the borrowing company to exit when it is convenient to do so makes the business much more like a Mezzanine finance operation and risks leaving Duke with the pedestrian performers.
Thirdly with a mining royalty one can look at the level of commodity prices and get a decent idea whether results from the royalty will be good, this is almost impossible with Duke's diversified investments in multiple sectors of the economy.

So I have sold out and reinvested elsewhere.

[johnroger] 08/2/2021 10:02

Simon presents a convincing argument for the upside for this company.

[value hound] 04/2/2021 20:15

Tipped by Simon Thompson for the 2021 Bargain Portfolio (IC)

[sleveen] 04/2/2021 08:08

Good update today.

[johnroger] 14/1/2021 13:23

More cash coming in !

Duke's funds have been used by Step, in part, to acquire a majority equity stake in the Dublin-based private education subsidiary City Education Group ("CEG"), a long standing, profitable business with a strong balance sheet which will provide the foundation for Duke's future monthly royalty payments from Step

-- Additionally, Duke's funds have been used in part to facilitate a further acquisition by a Step subsidiary of a majority interest in Adtower Digital Media ("Adtower"), a profitable Irish business within the digital out of home advertising sector, which has demonstrated resilience through the Covid-19 pandemic through their focus on supermarkets, petrol stations and convenience stores. This acquisition diversifies Step's revenues further and increases its EBITDA

-- Now that this transaction has completed, Step will immediately resume monthly royalty payments to Duke including all catch up payments from 1 October 2020

[johnroger] 11/1/2021 15:18

In light of the Company's growing pipeline of opportunities driven by business owners' desires turn to long-term capital solutions, Mr. Madouros' appointment provides Duke Royalty's Investment team with additional expertise, particularly in the European non-bank credit sector and increases capacity for origination and execution of new transactions. Formerly a senior member of the investment team at Pollen Street Capital, Duke Royalty's debt provider, Mr. Madouros has a strong track record of working closely with UK SMEs to assess their needs and structure appropriate capital solutions. He will be responsible for conducting the due diligence and negotiations on prospective investment opportunities, directing the execution of royalty transactions approved by the Duke Royalty board and monitoring royalty investments made by the Company.

[energeticbacker] 22/12/2020 17:53

Investor's Champion has concerns about the business model. FRom the latets Investor's Champion update "For the year ending December 2019, Slake Holdings Ltd, the parent company of Miriad and associated companies, generated revenue of £22.2m and a pre-tax loss of £671k, after interest charges of £1.5m. The balance sheet was negative to the tune of £888k with long term creditors (which include Duke’s £10m) of £14m."

[thirty fifty twenty] 22/12/2020 13:03

hi Stevie B - at first, i was thinking similarly when i read the RNS.
however this has always been stated as a part of their business model,
and the attraction is now the NAV but the income stream - whilst they hold they get very high income returns which pay the high dividend. so yes maybe the strongest companies will re-finance and then DUKE make an immediate profit.

the biggest for me though is that the chart rectangle base is now pretty clear IMHO

All IMHO, DYOR + BoL
DUKE is in my portfolio

[johnroger] 22/12/2020 12:57

" Proceeds from this exit will leave Duke in a positive net cash position, thereby providing significant liquidity of over GBP30 million for new deployments with several new and follow-on investment opportunities currently at a late stage of due diligence"

More good news to come?

[stevie blunder] 22/12/2020 09:31

The two exits Duke have made point out a weakness in the business model. I knew that the agreements had an exit clause that could be triggered by the Partner, but I had not expected such exits to be common. The worry is that Duke loses Partners as soon as they achieve enough success to get a better offer from lenders, or in the case of Weltel, Private Equity. In the current easy money environment we may see more, leaving Duke with the less successful Partners.

On the other hand the NAV has had a boost of about 3% and the market seems to like it, so maybe it is all in the price.

[peter27] 22/12/2020 07:47

Will today's news break the 30p ceiling?

[johnroger] 09/12/2020 19:53

After Investor's Champion posted their negative view on DUKE in November the share price increased by 20%. Here's hoping for the same again!

[energeticbacker] 09/12/2020 15:45

Cash revenue in the period of £4.4m and net cash inflows from operations of £3.6m were, according to management, just 8% below the comparative period in 2019, “despite the structuring of five forbearance agreements to support royalty partners through the pandemic”.

Investor's Champions wonders if they might be missing something, but this seems to ignore the fact that Duke has made a further £16m of advances since the comparative period to 30 September 2019 and also raised £20m of new funding in October 2019.

Therefore, cash flows should realistically have been significantly higher than the comparative period, based on the substantially larger pile of capital at work, unless of course that 8% is on a like for like basis, stripping out the impact of new advances.

More on their website.

[swiss paul] 24/11/2020 20:32

Nice update in C this week