Duke Capital Share Discussion Threads

[piedro] 16/7/2018 09:57

What does "Upon full capital deployment" mean?
The placing capital?
And then they will be back again for more money
For more capital to deploy.

It is nice to have a hefty dividend but as noted above, placings can be expensive and the free cash could be reinvested.

AIMO.

[stevie blunder] 16/7/2018 08:57

"Upon full capital deployment, the Board believes that Duke will be able to increase the Company's dividend to a near double digit yield."

[spectoacc] 16/7/2018 07:28

44p is good going, but agreed re size - 100m more shares, and £2m in costs it seems (raising only £42m net).

[dsct] 13/7/2018 18:59

As a recent investor, having bought in during the last week of June, I received my first divi a couple of days ago - very nice. The small share price rise since purchasing has also been a bonus.

The placing today, I presumed would happen, from what I'd read during my DYOR.

More diversification - Geographical and Sector.
A small(?) discount (7.6%).
Existing and new investors taking up the placing.
£200k from Directors taking part in placing.
A majority of proceeds already earmarked.
Repayment of £3.5m loan - I'm pleased about this, as this was, I though a negative.
Long term incentive plan issued equivalent of just over 1% of number of shares in this placing.
I presume we should (could?) be getting RNS holding notices shortly after the placing. Both increase and decrease in holdings percentage.

All in all, this seems according to plan, and I can't see any negatives, so this should hopefully plod on, distributing an increasing divi to us holders.

Time for me to top-up already ? lol

GLA

[igbertsponk] 13/7/2018 18:05

Not crazy.They launched to prove the N American model would work in Europe and have proved it does so now ramping up.

[discojames] 13/7/2018 17:07

£44m placing!! Thats crazy when MCap is only £52m

[stevie blunder] 03/7/2018 21:25

Hi piedro
Hopefully this will be a bit less of a wild ride than with APF :)
The presentation linked in the header talks about a £46 million pipeline of deals, so a lot of shares to be issued
Hopefully at ever higher prices as we get some “ yield compression “

[piedro] 03/7/2018 08:33

Hello Stevie and others,
I bought my first splurge yesterday

This appears to be a "too good to be true" company but hopefully not.
Income should be reaching £4m p.a.

Now that they have spent all their fundings, I presume there will be
further placings for future royalties.

[dsct] 29/6/2018 21:50

@Stevie Blunder

Thanks for your replies - very informative.

I did go through their website - Who, what, when, how etc. and when looking at the media section, recalled reading about DUKE in the Shares magazine in April and thinking I should DYOR as it looked interesting.

Anyway, I've now had a dabble, pre-divi. Initially, I was more interested in the divi return than potential share price increase, but it looks as though the latter could improve as they get more Royalty Partners (even if they have to issue more equity), due to their near-fixed costs.

[stevie blunder] 25/6/2018 10:57

I missed this May presentation on the website

[stevie blunder] 25/6/2018 09:10

Hi Dsct, Ill do my best to answer your points, however you seem do have done your homework, so you probably know as much as me :-)

I wouldnt class the funds as loans for the simple reason, as you state, they are not repayable. The agreements entitle Duke to a % of turnover of the underlying business assessed annually and subject to a collar and cap. ( the collar and cap is not a feature of royalties in the mining industry so the analogy with mineral royalties is not an exact one and may be misleading rather than helpful)
The effective interest rate of 13-14% may seem high, but is not out of line with mezzanine financing options.

Looking at the announcement of the first Royalty with Temarca:- "The term of the Financing is for a period of 25 years, will be senior secured and Duke has provided Temarca with a buyback option." Without seeing the paperwork relating to the agreement, I couldn't say what the exact meaning of "senior" is in this context, also like you I would imagine that the buy-back would rely on a net present Value calculation

It seems that they are able to tailor the agreement to each partner, for example they are taking an equity stake here:



· 2.5 per cent. equity interest in Trimite granted at no additional consideration

Again this is not out of line with mezzanine finance.

So would they be exposed in a recession? Yes is the answer, but they seem to be investing in businesses that have survived at least one recession and are relatively stable.

AS for the recent loan, I dont know the reasoning behind that, perhaps the hope to get a placing away at a higher price and cause less dilution later in the year? or they plan a bigger placing rather than a succession of smaller ones which could be more costly in advisors or brokers fees. your guess is s good as mine.

I do think this is quite a risky investment and only have about 1.5% of my folio invested.

All the best

[dsct] 23/6/2018 19:43

I've been looking into DUKE, and have a few questions/notes and I'd be grateful for any answers to, or confirmation that I'm thinking along the right lines.

It appears these Royalties, are a loan in all but name, but as a senior security, presume they have seniority (unsurprisingly lol) over other loans, in the event of a company going bust. i.e. The claims against a companies assets being Taxman, Senior security, (bank) loans, creditors and finally equity holders.

I can see the idea behind the equity fundraising to enable them to provide investments at a faster rate, but not sure about their recent loan, at what appears a high interest rate. I understand the loan is only a short term (1 year) term, and hopefully, once up to a certain level of Royalty Partners, they'll be able to self-fund these investments, unless there's a rapid influx for some reason.

Does anyone have any thoughts on how DUKE will cope if there's a general economic downturn? I understand they're diversified with respect to sectors, geographies etc., but would this situation be beneficial (more potential Partners), or detrimental (more defaults on repayments).

The investments are 25 or 30 years (or perpetual), and they receive monthly returns of approx. 1%, so quite a nice return, for what should be a near-fixed expenses base (salaries, tax, fees, etc.)

They state on their website "no repayment of principal at end of life of royalty" - Why is this ?

Regarding the buy-back option incurring a penalty - I presume this is based upon the remaining term, so if a Partner wants to repay the principle after 10 years, a calculation is made to see how much DUKE would have been repaid over the remaining term, and a figure agreed based upon that.

I like the fact they're the first-mover on this within the UK, but wonder what's to stop other competitors jumping in if they see it becoming a success, or possibly those in Canada/USA expanding to the UK.

IF I do decide to have a dabble on DUKE, my next decision will be pre- or post- the divi date next week.

p.s. So nice to have an informative, ramp/de-ramp free board on ADVFN ! Just 30 post in a year, although I may have now screwed that up !

[nurdin] 14/6/2018 10:51

Looks like they wanted to clinch an exclusive deal on this investment in a hurry and with no money in the coffers,were forced to take out a short term loan to close the deal quickly.There will be a cash call shortly no doubt but fully justified. Id be happy to subscribe given a chance!

[nurdin] 14/6/2018 08:56

Looks like an excellent investment.However not sure about the financial logic to fund it...

[stevie blunder] 26/5/2018 09:29

This came up on my Google News feed:



Five 'income incubators' from the small-cap market

After completing due diligence on the underlying royalty partners, DMI has taken a 5.16% position in the equity of Duke Royalty. This is a significant position, equivalent to around 4% of the portfolio.

Our forecasts suggest that we can expect an initial yield of 6.3% growing at a compound rate in excess of 30% over the next two years, resulting in a yield on cost of 8.8%.

[nurdin] 09/5/2018 09:26

Creeping up nicely.

[nurdin] 08/5/2018 09:18

Agreed.Has high operational gearing which should boost dividends with modest increases in investees revenues.

[stevie blunder] 08/5/2018 08:55

Decent update this morning covering roughly half of the the royalty portfolio.
That should help get the next equity raise away without much of a discount

[stevie blunder] 24/4/2018 09:00

Barclays have fixed the problem after Duke's intervention so I can buy more.

And a new royalty this morning, which is obviously good news but also takes us closer to a share issue as they will almost be out of cash.

I've added a few this morning

[rik shaw] 22/4/2018 08:40

Tip in DM today

[stevie blunder] 18/4/2018 21:14

Thanks for the info about HL

Duke have replied that they are aware that the problem exists with some online brokers and have their legal people working on it
They promised to let me know when they sort it out.
Not impressed with Barclays

[toadhall1] 17/4/2018 23:14

No issue when i bought some at start of April from HL. Regs been in place since 1st Jan 2018 right. And that link suggests they have made the determination the rules don't apply to them. Be good to hear from others.

[stevie blunder] 17/4/2018 13:19

I was thinking of adding to my holding here but Barclays wont let me.
They say that DUKE is an investment trust so needs a Key Info Document, KID, before retail investors can deal. Morningstar list DUKE as an IT and that is that as far as Barclays are concerned.

DUKE say they dont need one:



Packaged Retail Investment Product Classification

Duke Royalty shares (the Shares) are NOT a retail packaged investment product within the meaning of Article 4 of Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs). As such, no key investor information document has been prepared in accordance with PRIIPs in respect of the Shares.

I have emailed DUKE asking them to sort it out.

Anyone else having trouble buying since these rules came in?

[stevie blunder] 13/3/2018 14:49

The raised divi will cost 2.35M cash/year.

Expenses at the half year were 630k, maybe 1.5M full year?

So if they get all the cash they raised invested at say 13% the divi is covered but not much more.