Duke Capital Share Discussion Threads

[swiftnick] 31/7/2022 16:55

Btgman, surely 8% yield corresponds to a share price of 35p? At the current share price of 33.75p I calculate a yield of 8.3%.Expecting a trading update this week.

[novision] 19/7/2022 12:16

Thanks btgman - as you say the update should provide a bit more insight.

[btgman] 18/7/2022 22:16

Novision

Duke are due a trading update before month end which should give an insight as to how things have going in the quarter ended June and expectations for September quarter.

I did my own modelling some time ago regards capital growth and assumed an element of write off and figures still looked strong based on my theories around company exit fees and capital exit profits.

We have seen how they navigated their way through the pandemic so generally speaking I think they are well placed with such a diverse portfolio of partners.

The other note is royalties are linked to turnover inflation leads to higher prices higher turnover and potentially higher royalties.

AIMHO
GLA
BTG

[novision] 18/7/2022 18:26

Thanks btgman. Appreciate the positives. What do you think about the impairment/under-performance risk for Duke as the recession unfolds and affects its clients? I haven't really been able to work that out yet.

[btgman] 17/7/2022 10:09

Looking at the current yield at 8% I still have a view that share price is undervalued but where should it be?

Duke Share price at varying yields
8%=32.50p
7.5%=37.33p
7%=40.00p
6.5% 43.07p
6%=46.67p
5.5%=50.9
5%=56p


There are many things to consider and to compare against but all of the above are higher than the FTSE 100 average:-

Average FTSE 100 yield is under 4%
Highest is circa 7.5% tobacco companies
Lowest 2% with a small number paying nothing


There are stocks around in the FTSE 250 paying 9%+ but I would argue the share price is likely to be more volatile than Duke in the current climate.

Duke have 30 year contracts in place with over 20 Royalty Partners linked to turnover across multiple sectors and countries with positive royalty kickers likely in September 2022 results announcement.

Hidden benefits also exist with potential for over £30m of exit fees as Royalty partners exit at some point. Recycling of this cash and the compounding effect is powerful as highlighted previously.

Finally we have many equity stakes in our Royalty partners valued in accounts at circa £3.5m upside for this is quite significant.


So back to original question where should share price be I think 6% would be a decent rate of dividend return and given the 6% kickers and equity stakes I don't feel that would be challenging which puts Duke share price target at 46.67p v the current 32.5p

AIMHO
GLA
BTG

[bountyhunter] 15/7/2022 08:04

Trading update soon? 26 July last year.
The share price did well after the trading update last year.

[btgman] 15/7/2022 07:27

Nothing has changed still yielding over 8% which makes this too cheap.
AIMHO
GLA
BTG

[bountyhunter] 14/7/2022 10:53

Emerging from a treeshake?
What's changed?

[divmad] 13/7/2022 19:38

Using your assumptions, it will take only 3 years for the majority of total capital return to come from dividends reinvested rather than share price growth.

[btgman] 13/7/2022 19:22

A simple £10k investment at 32p dividends quarterly reinvested price at 40p by October and constant thereafter, Dividend maintained at .007 per quarter share price
10 year view



Duke Price Shares Total
Invest 10,000.00 0.32 31,250.00
Jul-22 Divi 0.007 218.75 0.32 683.59 31,933.59
Oct-22 0.007 223.54 0.40 558.84 32,492.43
Jan-23 0.007 227.45 0.40 568.62 33,061.05
Apr-23 0.007 231.43 0.40 578.57 33,639.62
Jul-23 0.007 235.48 0.40 588.69 34,228.31
Oct-23 0.007 239.60 0.40 599.00 34,827.31
Jan-24 0.007 243.79 0.40 609.48 35,436.78
Apr-24 0.007 248.06 0.40 620.14 36,056.93
Jul-24 0.007 252.40 0.40 631.00 36,687.92
Oct-24 0.007 256.82 0.40 642.04 37,329.96
Jan-25 0.007 261.31 0.40 653.27 37,983.24
Apr-25 0.007 265.88 0.40 664.71 38,647.94
Jul-25 0.007 270.54 0.40 676.34 39,324.28
Oct-25 0.007 275.27 0.40 688.17 40,012.46
Jan-26 0.007 280.09 0.40 700.22 40,712.68
Apr-26 0.007 284.99 0.40 712.47 41,425.15
Jul-26 0.007 289.98 0.40 724.94 42,150.09
Oct-26 0.007 295.05 0.40 737.63 42,887.71
Jan-27 0.007 300.21 0.40 750.53 43,638.25
Apr-27 0.007 305.47 0.40 763.67 44,401.92
Jul-27 0.007 310.81 0.40 777.03 45,178.95
Oct-27 0.007 316.25 0.40 790.63 45,969.58
Jan-28 0.007 321.79 0.40 804.47 46,774.05
Apr-28 0.007 327.42 0.40 818.55 47,592.60
Jul-28 0.007 333.15 0.40 832.87 48,425.47
Oct-28 0.007 338.98 0.40 847.45 49,272.91
Jan-29 0.007 344.91 0.40 862.28 50,135.19
Apr-29 0.007 350.95 0.40 877.37 51,012.56
Jul-29 0.007 357.09 0.40 892.72 51,905.28
Oct-29 0.007 363.34 0.40 908.34 52,813.62
Jan-30 0.007 369.70 0.40 924.24 53,737.86
Apr-30 0.007 376.16 0.40 940.41 54,678.27
Jul-30 0.007 382.75 0.40 956.87 55,635.14
Oct-30 0.007 389.45 0.40 973.61 56,608.75
Jan-31 0.007 396.26 0.40 990.65 57,599.41
Apr-31 0.007 403.20 0.40 1,007.99 58,607.40
Jul-31 0.007 410.25 0.40 1,025.63 59,633.02
Oct-31 0.007 417.43 0.40 1,043.58 60,676.60
Jan-32 0.007 424.74 0.40 1,061.84 61,738.44
Apr-32 0.007 432.17 0.40 1,080.42 62,818.87
Jul-32 0.007 439.73 0.40 1,099.33 63,918.20

25,567.28 Value year 10
1,789.71 Annual Dividend
Stunning
AIMHO
GLA
BTG

[btgman] 13/7/2022 19:10

A 40p share price and a 7% yield is where this should be in my view.

I think the market always ignores the fact that some of the Royalty partners will settle up the loan paying Duke a 20% premium and they have a fair few equity holdings which is likely to bring further share price rises.


The model of putting the dividends back in effectively books a close to 9% yield on the reinvestment depending on when it went back in. That is very powerful compounding up quarterly on those numbers

AIMHO
GLA
BTG

[bountyhunter] 13/7/2022 17:18

Dividends were reduced modestly during the worst of the pandemic but have been rising again since lockdowns ended...

[divmad] 13/7/2022 14:13

But it can form part of a diversified high income portfolio, with upside potential for a LTH.

[bend1pa] 13/7/2022 14:03

I think 1 or 2 here have short memories. They made pre-tax losses in two out of the last 4 years. And only last year the div was cut from 2020's payout of 2.95p by 65%. So I wouldn't believe for a moment that the div is safe, nor is it like a guaranteed 'annuity'. It certainly is not.

[riverman77] 13/7/2022 13:52

I must admit I question the wisdom of paying a high dividend, while frequently going out to the market to raise more capital. Paying money out, and then asking for it back. Not saying it's a bad company, but seems a bit odd.

[mr hangman] 13/7/2022 13:31

"8.5% gross yield is too tempting to ignore"
9 times out of 10, the market does not get these things wrong
If they experience difficulties paying the div, they will just offer
shares in lieu, or trot of to Primary bid..

[riverman77] 13/7/2022 13:23

LGEN now yielding 8% and pretty resilient too - in my view it would take a major economic shock for that to be under threat as their Solvency position looks very strong. There are a few others out there, but LGEN probably my top pick from a purely yield perspective.

[btgman] 13/7/2022 13:11

Next set of results are likely to littered with a fair few 6% kickers on their royalties. As for down turn they have a very wide spread geographically and across different sectors. I am more than comfortable they will maintain the current level of dividend. You have to note that they have 30 year contracts in place with their royalty partners.
I don't see much yielding a genuine 8.5% that is the case here and the share price is undervalued
AIMHO
GLA
BTG

[divmad] 13/7/2022 12:34

As I understand Duke's business, they receive royalty income straight from the top line sales revenues of their Royalty Partner companies. And those payments were well covered by EBITDA of the underlying businesses, as at the time of the last placing, anyway. If Europe goes into a deep recession, the risk is that sales contract, and with it Duke's service income. But it would have to be across the board contraction, and sustained, to have a measurable harsh impact on their Royalty income flow and therefore dividend payment rate.As Duke demonstrated after the 2020 economic dip, their underlying partner businesses bounced back strongly once demand came back, so I would imagine the same would happen after this economic slowdown/recession.8.5% gross yield is too tempting to ignore.

[riverman77] 13/7/2022 11:34

Usually if something is yielding 8% then the market thinks the yield isn't sustainable or at risk. Don't know enough about the underlying companies to say if that's a fair assessment. There do seem to be some rather cyclical names in their portfolio, which I'd imagine might come under pressure in a downturn?

[divmad] 13/7/2022 11:29

Is the 0.7p quarterly dividend going to be well covered, going forward?

[bothdavis] 13/7/2022 10:46

I love the yield too....just wish the share price would move upwards....down 21% on these!!

[btgman] 12/7/2022 19:51

Seems the market doesn't value a 8.6% yield. I do thank you Duke. Very happy to be compounding at these levels. For anyone that understands this it's a fantastic investment below 40p
Is an incredibly cheap annuity in my view
AIMHO
GLA
BTG

[bothdavis] 08/7/2022 21:36

24% down on this one now!

Will I rue the day..........