Duke Capital Share Discussion Threads

[johnroger] 19/11/2020 11:51

Thanks, may be in this weeks paper copy.

[kadvfn1] 18/11/2020 22:18

Last ST update on Duke was on 16th Nov. He set target range of 32.25-41

[johnroger] 18/11/2020 20:01

Has ST commented since the recent Trading Update?

[kadvfn1] 18/11/2020 17:34

Nice article. Total opposite and in line with ST's view which is nice. I hope we can get to 35 soon

[johnroger] 18/11/2020 17:10

Those readers looking for an AIM share tip which would seem to have significant recovery potential could do worse than invest in DUKE ROYALTY. It will probably come as no surprise to readers to learn that the share price has more than halved this year, falling from a high of over 50p at the start of the year to a low of 17.5p in April. Although the share price has rallied subsequently, it still stands at just over 50% of the 2020 high, and the positive trading statement released last Thursday indicates that better times may lie ahead.

Duke Royalty is an unusual company operating in an interesting niche market, providing royalty finance to companies in the UK and Europe. The business of royalty finance is well-established in North America, notably Canada, and the founders of the business decided that the business model could be replicated over here. Essentially, the business provides finance to SME’s in exchange for a percentage of the latter’s future revenues. This allows the business owners to retain control over their company as Duke does not take an equity stake whilst also providing the business owners with another source of capital. There is also no refinancing risk as the royalty payments made by the borrower include both principal and interest and these repayments are made over the long term.

Last week, the group issued a trading statement including the news that it intends to pay a dividend of 0.5p per share foe the upcoming quarter, which covers the three month period to 31 December. The group had 12 royalty partners at the start of the pandemic and seven of these have maintained their monthly cash payments to Duke throughout the period. Four of the five royalty partners who entered into forbearance agreements have now resumed payments and in some cases this has resulted in Duke taking equity stakes in the businesses in lieu of the payments that were not made.

In last week’s statement, the company also confirmed that it has substantial capital to deploy and, with the current outlook for SME’s being challenging, this is expected to provide significant investment opportunities going forward. BUY

[kadvfn1] 18/11/2020 16:49

Do you mind posting the article please

[johnroger] 18/11/2020 16:36

Thanks sharetips

Complete contrast to Investors Champions and yet based on exactly the same information!
You pays yer money ----

[swiss paul] 17/11/2020 12:45

That is if we have not ended up owning the assets which was being alluded

[waterfall city] 16/11/2020 19:46

The cylical companies it holds must offer recovery potential when the covid situation improves,leading to a reversal to the write down in asset values.

[red ninja] 16/11/2020 13:30

Yep looks like Duke share price has still got legs.

According to lse website Duke Royalty has no shorters.

As previously stated Investor Champion tip site do not appear to be backers, but Downings and other investment houses appear to like them.

[tonytyke2] 16/11/2020 13:21

Perhaps some of the shorters have got stung in the past couple of hours.

[red ninja] 16/11/2020 09:54

If I'm reading that chart then the cycle has already turned earlier than the last one and is heading back down to circa 20p. Just my view.

[brileyloucan] 13/11/2020 13:46

I've looked at Duke for at least two years but never managed to get comfortable on valuation grounds. At the end of the day this is a finance company so I can't see why I would pay 90% of Tangible book value, when I can buy solid banks and other finance companies in the 50% to 60% range.

They do have some positives which might make me push it higher than competitors but it also has plenty of negatives - concentration, exposure to higher risk entities, lower down capital structure. Therefore the "right" price in the current market seems to be in the low 20's.

[owenski] 13/11/2020 13:34

Taking 'paper' - equity - instead of cash says it all. If a company cant pay it's agreed obligations, then there's a problem, taken it's paper instead is risky and could turn out to be worthless paper.

Not a great business model under the current situation.

[igbertsponk] 13/11/2020 13:26

Amateurish hatchet job.

[johnroger] 13/11/2020 12:47

This is the article referred to in the above posts. The analysis seems a little superficial.
Duke is one of my largest holdings but thought I would copy the article [free to read]in the hope it might encourage a little more discussion. Bazzer1000 thank you for your research.

This royalty financing group now has considerable equity exposure to numerous companies of questionable worth and that’s even before one factors in the considerable impact of the pandemic. There are far too many red flags for us!

Duke Royalty (LON: DUKE), the finance provider adopting a royalty lending model, issued what at first glance appeared to be an encouraging update for its 3rd quarter ending 31 December, with the reinstatement of a 0.5p quarterly dividend. However, delve deeper and it appears far from rosy.


Cash revenue for the period, being cash distributions from its Royalty Partners and cash gains from sales of equity assets, is anticipated to increase to £2.5m, compared to £2.0m in Q1 FY21 and £2.4 m in Q2 FY21.

Of Duke's 12 Royalty Partners at the start of the pandemic, seven of them maintained their monthly cash payments throughout with 5 granted forbearance. Duke also provided additional capital to certain Partners in support of growth opportunities and achieved a first cash exit from one, returning more than 1.5x the capital lent. That was the good news!

Four out of the five royalty partners which entered into forbearance agreements have now come out of forbearance and Duke has assumed equity positions in 3 of these of c. 30% in lieu of foregone cash revenues.

The equity investments may compromise Duke’s qualification for Inheritance Tax planning purposes. You can use our AIMsearch facility here to check on this.

The net debt position is currently £14.0m.

Management considers that at the current share price of 27.80p Duke trades at a substantial discount to its underlying net asset value per share, which stood at approximately 30.9p per share at 31 March 2020.

While the shares rose 10% on the day of the announcement the discount doesn’t look terribly substantial to us. Furthermore, it is very difficult to value its Partner assets with any confidence given the uncertain operating environment for many of them. Duke may also need to make a further significant impairment to many of these claimed royalty investments to add to the charge applied in the year ending March.

It currently has significant (30%) equity stakes in numerous private companies which could be extremely difficult to realise, given the royalty lending arrangements in place with Duke i.e. Duke is now the only viable buyer of these businesses.

One of its equity positions is in a well-known business called Trimite Global Coatings (Trimite Top Co), whose balance sheet at 31 March 2019 (note, well before the pandemic hit) reveals that it was effectively insolvent. Duke has £9m exposure to Trimite, equivalent to 12% of Duke’s NAV.

It’s a similar situation with other partners United Glass Group and MRDB Holdings/Slake Holdings.

In the case of another partner. Temarca, Duke has been forced to take ownership of its 3 river cruise vessels.

It all looks very flakey to us and the reinstatement of a cash dividend is at odds with the precarious position of several of its Partners, five of whom appear to be based in Ireland.

Many of these Partners need a proper equity injection of capital not another layer of high cost debt.

There could be trouble brewing here!

[bazzer1000] 13/11/2020 12:34

Hi EnergeticbackerMost of your posts seem to reference the Investor's Champion web site. Can you tell me if you have any professional relationship with them?I've looked into the accounts of both Trimite Limited and Carr's Coatings both of which I believe belong to the holding company Trimite Global and they look far from insolvent to me. I will look into the other companies Investor's Champion reference in due course, but I wonder if they have been thorough enough in their appraisal of an investment in Duke?B

[energeticbacker] 12/11/2020 15:49

Investor's Champion has taken a close look at the filed accounts of some its Partners, many of which were effectively insolvent. It doesn't look good !

[parsons4] 12/11/2020 13:00

A very good RNS, this company is going places, I topped up yet again this morning, now one of my biggest holdings. And with a great yield !!!

[martindjzz] 12/11/2020 09:10

I too like the transparency. It would be interesting to know the basis on which NAV per share was calculated to be 30.9p as at 30th March 2020. Is this the first time the Board has given us this metric? For example I don’t think a figure was given in the investor presentation in Feb 2020. I acknowledge that I could have worked it out from the annual statements.

[tonytyke2] 12/11/2020 08:54

Great update IMHO, management seem to be very proactive here.

[bg23] 12/11/2020 08:20

v impressive. i do like this little company. i've long been impressed with its transparency and am intrigued by royalty financing as an attractive form of growth capital.

Evidently, i should have bought a week or so ago :-(

[bwm2] 12/11/2020 08:00

And good to see the transparency regarding each companies state of affairs.

[belgraviaboy] 12/11/2020 07:29

Very solid update this morning - dividend reinstated

[red ninja] 10/11/2020 12:08

Has Judith Mackenzie been promoting Duke Royalty at the Mello Monday event is DUKE just repeating the last two chart cycles ie a move back to around 30p ?