TRA - Turners Automotive Group [previously TNR - Turners Limited]

[Snoopy]

I'd like know you rate the management of DPC compared to HNZ.

I don't know much about either board - seems HNZ has an ex-senior Westpac exec running it, and, DPC is chaired by a venture capitalist - ex Ecoya, 42 Below, Moa.

Look at how the Ecoya, 42 Below and Moa deals were structured - whose money was at risk?

I respect the boards of both HNZ and DPC. Both companies have had large capital raisings since the GFC (in fact HNZ was created by a large capital raising out of PGC). Since 2011 I don't think either board has put a foot wrong. HNZ I think has perhaps faced the most difficult transition as they unwound their difficult property portfolio. But as of FY2014, I would say both companies are on track.

I guess DPC has a residual cloud of doubt to overcome, as a survivor of the NZ financial sector meltdown. But it is transforming into quite a different business compared to what was there before. Maybe those entrepreneurial people on the DPC board are helping here?

Whose money is at risk in the DPC bond offer?

There will be another crash some time. They seem to come around every 10 years or so. The last one was in 2008. How would this company do in a crash?

Heartland has a BBB credit rating which, on average, means it might fail within 30 years. Or looked at another way it has about a one in five chance of failing in the next GFC.

Dorchester has no rating because it no longer takes public deposits. The insurance arm of Dorchester has a rating of B+. So if Dorchester did have a rating it would probably be lower than Heartland. To make up for this Dorchester has a higher equity ratio though.

The other thing I like about Dorchester is the bad debt recovery business it does for the major banks. Perversely the more bad debts start to rack up at the major banks, the better for Dorchester's debt recovery business. So Dorchester has a natural hedge in their business model if the economy starts to go bad.

As for whose money is at risk, I have niggling doubts about all the second tier finance companies. This is why I favour converting some of my TUA shares into DPC bonds. As a bondholder I can watch from outside the tent for a couple of years. If I don't like how DPC is progressing then I will redeem my bonds for cash. If I like how DPC is going I can convert to shares in two years. My DPC bonds will be paid back before shareholders capital if DPC does run into trouble. But as you have assessed Bunter, the bonds are not a totally risk free investment.

FWIW I sold my TUA on-market at a small discount to the net offer price two weeks ago - for a sure return.

And no doubt you made a tidy profit and have since reinvested. Me, I will wait until that independent TUA valuation report comes out before I make my final decision.

SNOOPY

[percy]

The DPC takeover of TUA has now reached the 90% mark and can now move to 100%.
Congratulations to Paul Byrnes for driving the takeover so well.No hic-ups.
The distribution channels secured for Dorchester with this takeover will secure a bright future for DPC.
The two businesses are now totally aligned.

[Snoopy]

Hello- where are we heading now. The Bakery buy a big stake. If anything it may be an intersting ride. Or is this just some swapping of share/cash with no relevance?

The above quote referenced the following press release:

--------

SSH: DPC: DPC - The Bakery acquires cornerstone stake in Dorchester

31 August 2009

The Bakery acquires cornerstone stake in Dorchester

The Business Bakery LP (The Bakery) announced today that it has purchased 7,117,226 shares in Dorchester Pacific Limited (Dorchester) for $400,000 or 5.6 cents per share. The purchase price is a discount of 18% against the volume weighted average market price over the last 30 business days and represents 19.47% of the Dorchester shares on issue. The shares were purchased from Auguste Holdings Limited.

The Bakery believes that while Dorchester has had some challenges, which the market is well aware of, there are also significant opportunities in the financial services sector which Dorchester, if well capitalised, would be able to take advantage of.

The Bakery will seek to work with the Dorchester board and shareholders in order to improve the future prospects of the company.

The Bakery is a limited liability partnership founded and managed by Geoff Ross, Grant Baker and Stephen Sinclair. As well as Dorchester, The Bakery has investments in The Hyperfactory International Limited, Foundry Asset Management Limited and Ecoya Pty Limited.

----

Five years on, I think we can say thst 'The Bakery's' move into DPC was astute. Perhaps then we should also pay attention to today's NZX announcement from DPC:

------

Summary of substantial holding to which disclosure relates
Class of listed voting securities: ordinary shares in Dorchester Pacific
Limited (DPC)
Summary for The Business Bakery L.P.

For this disclosure,--
(a) total number held in class: 84,617,226
(b) total in class: 616,463,185
(c) total percentage held in class: 13.726%

For last disclosure,--
(a) total number held in class: 84,617,226
(b) total in class: 479,342,632
(c) total percentage held in class: 17.653%

-----

The number of shares have not changed so the Bakery are not selling down. But neither are they putting any more money into the company via the recent capital raising by 'committed shareholders' even though some say 25c is a bargain. So perhaps the Bakery is not as 'committed' to financing the further expansion of DPC as they were?

SNOOPY

[Snoopy]

,

------
Summary of substantial holding to which disclosure relates
Class of listed voting securities: ordinary shares in Dorchester Pacific
Limited (DPC)
Summary for The Business Bakery L.P.

For this disclosure,--
(a) total number held in class: 84,617,226
(b) total in class: 616,463,185
(c) total percentage held in class: 13.726%

For last disclosure,--
(a) total number held in class: 84,617,226
(b) total in class: 479,342,632
(c) total percentage held in class: 17.653%

-----

The number of shares have not changed so the Bakery are not selling down. But neither are they putting any more money into the company via the recent capital raising by 'committed shareholders' even though some say 25c is a bargain. So perhaps the Bakery is not as 'committed' to financing the further expansion of DPC as they were?

Weetbix still a very popular breakfast cereal. I know that because the number of Dorchester shares continue to increase. We are now up to 624 million. There are also 23.147m bonds on issue. Let's say they convert in just under two years time at 33c per share. That means there are in effect 693m DPC shares out there in the future. Let's round things up and call it 700m for ease of calculation in the future.

Meanwhile Bartel Holdings appear on the share register as a substantial holder with just over 7% of the company.

The share price seems very strong at the moment, up 3.8% today to 27.5c. I woudl say mimicing that other listed finance company Heartland. But I think in percentage terms, the share price rise is even better.

SNOOPY

[percy]

Weetbix still a very popular breakfast cereal. I know that because the number of Dorchester shares continue to increase. We are now up to 624 million. There are also 23.147m bonds on issue. Let's say they convert in just under two years time at 33c per share. That means there are in effect 693m DPC shares out there in the future. Let's round things up and call it 700m for ease of calculation in the future.

Meanwhile Bartel Holdings appear on the share register as a substantial holder with just over 7% of the company.

The share price seems very strong at the moment, up 3.8% today to 27.5c. I woudl say mimicing that other listed finance company Heartland. But I think in percentage terms, the share price rise is even better.

SNOOPY

Owning Heartland and Dorchester I am enjoying the upward trajectory of both..!!!

[blackcap]

I know that because the number of Dorchester shares continue to increase. We are now up to 624 million. There are also 23.147m bonds on issue. Let's say they convert in just under two years time at 33c per share. That means there are in effect 693m DPC shares out there in the future. Let's round things up and call it 700m for ease of calculation in the future.



SNOOPY

Hi Snoopy, you seem to have an obsession with the number of shares that DPC have issued. If as you say shares issued have "doubled" but profits have more than doubled... what is the problem?
Their strategy also enhances the capitalisation of the company and will help get insto's on board and help drive future shareholder value.

You can either grow slowly organically or grow quickly through merger and acquisition (meaning off course either debt increases/equity increases or a mix of the two)

[percy]

Hi Snoopy, you seem to have an obsession with the number of shares that DPC have issued. If as you say shares issued have "doubled" but profits have more than doubled... what is the problem?
Their strategy also enhances the capitalisation of the company and will help get insto's on board and help drive future shareholder value.

You can either grow slowly organically or grow quickly through merger and acquisition (meaning off course either debt increases/equity increases or a mix of the two)

I see DPC the same way Blackcap.Their acquisitions have been very astute.
The number of shares or share price does not alter the market capitalisation which is still under $170mil.

[Snoopy]

The number of shares or share price does not alter the market capitalisation which is still under $170mil.

I am going to assume that Percy has had a brain fade moment here.

The Market Capitalisation = (No.shares on Issue) x (Market Share Price)

SNOOPY

[Snoopy]

Hi Snoopy, you seem to have an obsession with the number of shares that DPC have issued. If as you say shares issued have "doubled" but profits have more than doubled... what is the problem?

The problem, if you want to put it that way, is that doubling the profit while doubling the number of shares on issue means the share price goes nowhere. However, I don't see a problem with issuing more shares in general, if the shares issued result in the associated acquisition being earnings per share accretive.

The critical bit is the italics. If new shares are issued to one party for the purposes of an acquisition that are earnings per share dilutive, that is equivalent to robbing all existing shareholders excluded from participating in the increased capitalisation of the company.

Company directors crow long and loudly about record profits. But as shareholders what matters are record earnings per share. IME, companies that issue lots of shares have a tendency to gloss over eps figures.

SNOOPY

[percy]

I am going to assume that Percy has had a brain fade moment here.

The Market Capitalisation = (No.shares on Issue) x (Market Share Price)

SNOOPY

No brain fade here.Just you did not use your imagination.!!!!
Have a 1 for 10 share consolidation,or a 10 for 1 bonus issue the important issue remains the market cap,which in DPC is still under $170mil.