Eur.Conv.Dev Share Discussion Threads

[scburbs] 06/6/2012 13:13

Greedfear,

ECDC appear to be making some progress sorting out the dogs (i.e. writing them off). As expected Galleria Plovdiv has proved to be significantly overvalued. However, the main concern remains that they still appear interested in propping it up. Unfortunately the language has changed from a minor investment in the 3 May update to a mid-level investment today. An external consultant who has recommended investing to drive occupancy in a market devoid of tenants ... More importantly what does mid-level mean.

"Although the Mall has been written down for 2011, the Manager believes there may potentially be some future value in the property. Galleria is a 46,500 sqm regional shopping centre and its only real competition is on the other side of the city which is the circa 20,000 sqm Mall of Plovdiv, a smaller mall in the centre of the city which is also experiencing difficulty in attracting tenants. As there are no other new malls under construction in the second city of Bulgaria, Galleria is well positioned to benefit from a pick up in the retail market over the next three years.

An external consultant has been employed to help develop the future strategy of the Mall. The strategy recommends a mid-level investment to quickly drive up initial tenant occupancy, introduce an entertainment / leisure centre and create a fashion hub to consolidate many of the smaller fashion retailers with a major fashion anchor. The bank appears supportive of this strategy and discussions are taking place regarding the restructuring of the loan facility."

Cascade continues to look like a strong asset and whether they can get the loan repaid in Trade Centre Sliven are the key upsides along with the cash balances. The annual cash burn and the potential mid-level investment in the Bulgarian dog mean caution is still needed.

There is also a worrying statement in note 9 that I missed when I looked at this initially. It implies that part of the Cascade value may be pledged against other assets.

"The Shareholders Cascade Park Plaza SRL have pledged their shareholding as security against the external loans to these companies."

Undoubtably very cheap which is why I am following it. However, still a bit too risky for me as not convinced management will act to preserve the NAV as opposed to gambling on future possible upside in Galleria Plovdiv. Exactly what a "mid-level investment" is, is fairly important to any investment case as are the plans for exiting Cascade and how much value, if any, is pledged to other banks.

[greedfear] 06/6/2012 11:59

No surprises in final results.
Good to see that Cascade has indeed been valued at 14 million now.
It will be sold 2012/2013 and maybe even at a higher price as Cascade is doing fine.

Anyway NAV of € 0.31 now (of which € 0.06 cash) while all bad real estate JV written down to the bottom.

I'm a buyer at € 0,0325 can't get just as many as I would like to.
Okay with me, I have time and patience. I can wait a couple of years for the tenbagger to become reality.

[greedfear] 25/5/2012 16:46

Darn! share price drops and I've only been able to add 50k shares. Must pay better attention.

[hoveite] 08/5/2012 11:53

Unfortunately I don't speak German, but even so I appreciated the view over Bucharest from Cascade Eurotower.

[greedfear] 08/5/2012 11:21

If you understand German very nice video about investing in real estate in Romania/Bulgaria covering Cascade (and other projects Iasa/Oradea) that ECDC participates in.

Enjoy! (Cascade etc from 2:48 on)



I must say the vid wants to make me buy more ECDC!

[greedfear] 08/5/2012 10:37

Thanks hoveite, haven't seen that! Nice to get some confirmation on the info I've got.

Planned exits (as far as I know):

Cascade 2012/2013
Iasa/Oradea late 2013
Rousse 2014/2015
Plovdiv 2015
Bourgas 2015

As you can see exits are planned before the 2016 AGM where the resolution to cease the company shall be proposed.

[hoveite] 08/5/2012 09:50

Here is the February update from one of the partners in Cascade.



For me the interesting point is that they are talking of an H2 2012 exit from cascade.

[greedfear] 08/5/2012 00:54

Regarding 2016: think they should (partially)clean the house before that.

[greedfear] 08/5/2012 00:32

Scburbs-once again thank you for giving your opinion.

You are right I do like high risk / high reward.

Tradecenter Sliven- I do not know how much of the assets consists of cash. Annuals 2008 give reason to think it's mostly landbank. Control of it? None. It's a joint venture between the company and Charlemagne. Charlemagne is managr of ECDC (and shareholder)

Charlemagne has assets under management of almost 2 billion GBP. Think I can trust them.

I too can see a risk in plovdiv needing cash injections. As total loss of plovdiv in 2011 was 1.9 million (40 per cent of that will hurt ECDC). A plus is though that only 61% was let so a lot of room for future improvement.

Management does have every intention to exit Cascade 2012-2013 with a very handsome profit.

In 2016 an ordinary reSolution must be proposed that the company ceases to exist.

[greedfear] 08/5/2012 00:06

scburbs   7 May'12 - 21:52 - 1215 of 1216 

Greedfear,

ECDC is a difficult one to value. It has multibagging potential if things go well, but can only fall 100% if they don't! I guess you like your investments high risk/high return!

The key seems to be the cash burn and the equity value in both Romanian shopping centres (such as Cascade the largest equity asset which looks in reasonable shape) and Trade Centre Sliven (which appears to hold cash for a development that is going nowhere?). Do you know how much cash is in Trade Centre Sliven and what control they have over getting it back?

Really the question here is do you trust the manager (the market doesn't seem to)? They have a choice of calling it quits now (and letting the dogs go) which should generate an excellent profit for shareholders from today's price or ploughing on regardless with the particular danger that recurring losses and cash injections to Galleria Plovdiv (or other dogs) could hurt the equity value. As Galleria Plovdiv is by far the largest asset by value if it is propped up then this could be a serious risk to shareholder funds (as leasing seems very weak). Perhaps they should let it go or only agree to fund in exchange for significant release of banks debts.

It is noticeable that despite the discounted valuation none of the normal arbtirage/value activist investors are here. The absence of activist investors reduces the prospects for the managers being kept in check. Given the dependence on limited good assets you need serious local knowledge to invest here, but its certainly cheap.

If they had a clear strategy of selling Cascade/Romanian shopping centres once let up, getting the cash back out of Trade Centre Sliven, letting any dogs go and then returning the surplus to shareholders then I would probably be a buyer. However, it looks like they might still try and prop Galleria Plovdiv up which makes them a risky investment.

[greedfear] 05/5/2012 14:20

Steady as she goes.

[greedfear] 29/4/2012 09:49

Good to see Cascade progressing as it should: bank loans okay and settlement paid.

Exiting Cascade 2012/2013 will probably bring in 15 eurocents cash per share.

I would love to see this share dip a little so I can add at bargain level, I won't hold my breath though.

[greedfear] 27/3/2012 09:30

IMPORTANT UPDATE: no update today!

[greedfear] 09/3/2012 13:18

Errr...is it coming to life?

Well, it should. Crazy valutation.

[greedfear] 01/2/2012 10:20

Shareholder update more or less like expected.

The improvement in valuation is most certainly coming from Cascade.
The 40% interest of ECDC has got an anticipated return of 14 million, while current valuation is 8.3. (+ 5-6 million).

Bulgarian malls are getting deeper in trouble by the looks of it.
Maximum risk there is a reduction to 0. That would mean a value reduction of 11.7 million. (management fees on a yearly base would be reduced by 0.2 million)

If I'm not taking into account the higher value of Cascade, but fully impair the Bulgarian Malls, worst case scenario would be a lower NAV of 0.13€.

That would mean a worst case NAV of 0.23€.

Good enough for me.

Still very cheap like you say.

[hoveite] 31/1/2012 12:15

Any thoughts on the shareholder update?

Looks like Cascade is doing OK - it's good to see that they are close to finalising an agreement with the bank over the extra sub contractor payment, and I would guess that the "improvement" that may be coming in the valuation of some of their assets likely refers to Cascade.

On the other hand, the Bulgarian malls look to be getting deeper in trouble with likely "significant" reductions in valuation.

The stock still looks cheap to me against a valuation based merely on cash + Cascade.

[hoveite] 24/1/2012 12:21

The finals weren't until June last year.

We are due a shareholder update though around the end of this month.

[greedfear] 24/1/2012 12:17

Results februari?

[greedfear] 13/1/2012 09:22

I don't care much about the current share price Strange thing is I don't mind the share price going north and I wouldn't mind going south. I'm invested for the end game here. My time frame is 3-4 years.

We're obviously driving on the same road lol!
I too am waiting for a more attractive BKSA price.....and keeping an eye on it.

[hoveite] 13/1/2012 08:45

Of course the flip side of its illiquidity is that it won't take many sells to push the price back down again!

By the way have you had a look at BKSA? It has some similarities to this situation in that it's trading not far above it's cash value and also has some Bulgarian property assets (none as attractive as the Euro Tower though). I'm keeping my eye on it and might buy some if the price drops. I might get my chance too as they are consulting on delisting from AIM and if they do that might bring out some sellers.

[greedfear] 12/1/2012 20:32

That makes two of us. I have not got as much as I wanted too. It was my intention to buy very gradually once in a while, because it's illiquid and the offer price is easily raised if there are shows of interest.

I do hope it stays at this share price level for some time as I do not trade, am in for the long term and are really expecting a great return here.
GL

[hoveite] 12/1/2012 18:35

Well, I noticed that ECDC's sister company ECPC has been pursuing a strategy of returning capital to shareholders - so it seems the managers are not allergic to returning cash after all. This persuaded me to buy some ECDC this week.

However before I had bought as many as I wanted at the price on offer earlier in the week, possibly because of my clumsy buying, or maybe in sympathy with the excitement over at OCH, the offer price has risen significantly today Still, I suppose that was to be expected with such an illiquid stock!

[greedfear] 04/1/2012 20:11

hoveite- No disagreement here. The performance has been dreadful and that's the reason why share price is where it is. It's doing a large discount and not only because of the current market.

Yes, they're taking 2% of the NAV, but I must give them credit for heavily writing off or impair on projects/JV's as that hurts the managers too. NAV decreases and so does the management fee.

I do not think 2% is excessive on its self. Anyway shareholders might be able to do something about it if they wish so. The management agreement can be ended with a 18 minths notice.

I have reason to believe that funds will be returned to shareholders someday. In 2016 shareholders may vote to liquidate the fund and all current projects will be ended before that.
As far as I know ECDC has exit strategies for the current projects. First project will probably be exited this year or 2013 (depending market conditions).

Like you I have doubts but think that uncertainty is priced in more than is justified.

BOL with your decision!