CDL & CDI ... Another Great Result

[BlackPeter]

Anybody noticed today's trading depth? Nearly 1.6 million shares changing hand - and orders for another 500k shares (at 62 and 63 cents) still waiting to be filled. Highly unusual depth for this stock ... something going on?

[Vaygor1]

I am hopeful it will finally get the recognition it deserves. Year on year gains with relatively little share price movement over the same time frame. With their recent release of FY Ending 31-Dec-2015, here are the metrics:

Attachment 7949

Those Book Value figures are unrealised profits. Some hidden value there when comparing it to the independent land valuations. Not sure why they didn't increase their divvy this year.

Looking at the TA bit, The 50 Day EMA just formed a golden cross with the 200 day EMA. MACD is comfortably in positive territory, volume up too.

Attachment 7943

So FA looks good, TA looks good. It will be an interesting few weeks.

Disc: Still holding. Been holding for ages now and accumulating slowly with the DRP.

[BlackPeter]

We'll see, but agree - the pattern looks promising, the recent depth is quite unusual - and hey, how often can you buy a company where the value of the land bank is already higher than the market cap?

Potential drawbacks are obviously (normally) limited liquidity, though the recent weeks looked much better ... and the general risks of an inflated housing market - though I think that these are manageable and oversee-able, given that their land bank is in the population centres (and people need to live somewhere) and not in the speculative holiday spots ...

Applied just out of fun Graham's formula to CDI based on 33% CAGR since 2010 and FY2015 EPS of 6.3 cents. This results in a "share value" of more than $4.60 per share, a bit more if we assume that their 2016 earning path follows recent trends (upwards). Obviously - this is just one of many data points and obviously they can't hold this amazing growth rate forever. On the other hand - they are still a quite small fish in a big pond, i.e. midterm do I see for them just the sky as limit.

Discl: holding and patiently waiting for the markets to wake up ...

[forest]

Hi BP, I see CDI as a cyclical company and coming up with a CAGR rate from 2010 wont give you the full cycle. But I suspect you knew that.

[macduffy]

We'll see, but agree - the pattern looks promising, the recent depth is quite unusual - and hey, how often can you buy a company where the value of the land bank is already higher than the market cap?

This seems to be the case quite often over the years with this company! Agree, though, should be good buying for the patient investor.

[percy]

Always an interesting company. I held it a good number of years ago and just when it looked very exciting, section sales stopped.
I now think the nature of the business is lumpy.That is, they buy land,then have to develop it,and then sell sections.So the time from start to finish is years.In the meantime companies such as Ebos are turning over their stock more than 10 times a year.

[BlackPeter]

Hi BP, I see CDI as a cyclical company and coming up with a CAGR rate from 2010 wont give you the full cycle. But I suspect you knew that.

Hi Forest, of course you are correct - it is just a bit more difficult to dig out older numbers ... and I wonder how meaningful they would be anyway due to various restructures (and I think there was as well a backdoor listing) before this time ...

However - lets be really negative and assume that they just had their 6 good years followed by 6 years with Zero in average growth (highly unlikely), than the overall CAGR would still come out with something like 15% and the Graham formula computes a SP value of $2.44;

And don't misunderstand me ... I never ever take these numbers as gospel (and neither should anybody else), the only thing I take from them is that the share price has a lot of headroom for potential growth ... remember - current SP is 62.5 cents ...

[Vaygor1]

I have never quite seen this before.

A member of the the public (Adrian Ho) has acquired enough CDI shares to cross the 10% threshold of CDI ownership.

By NZX definition, this means he is suddenly no longer allowed to be considered a member of the public regarding CDI ownership.

This in turn means CDI's public ownership has dropped below 25%, the minimum limit to allow CDI to continue trading under the NZX rules. Public ownership is now only 23.1%

CDI, as a result has been granted a 12 month waiver from the rule(s), and must report shareholder spread quarterly.

Total shares issued is 276.1 million as at 1-March-2016
23.1% = 63.68 million shares.
25% = 69 million shares.
Amount required to be made public to satisfy the NZX rules is 5.3 million shares.
Looking at the top 20 shareholders, the only entity in reality with sufficient volume to sell to fix this is MCK

Attachment 7950

Questions (kind of rhetorical).

If this doesn't correct over time, will MCK be forced to sell some of it's CDI holding?

Given the poor trading liquidity of the stock, would this cause a significant market overhang?

What happens if Adrian Ho (or other non-public entity, if any, by NZXR definition) scoops up whatever MCK might have to sell, thus continuing the rule breach (but fixes the potential overhang I suppose)?

Does this then mean that MCK can be forced by the NZXR into taking the dividend instead of opting for shares under the DRP scheme timed around the end of May this year?

Could this, in turn, effectively force CDI into not retaining sufficient enough earnings it's Board may have desired?

There are more questions that lead on from these I am sure.

Reference: https://www.nzx.com/companies/CDI/announcements/279703

[forest]

b. as at 4 March 2016, CDI has approximately 2,830 shareholders who are Members of the Public, holding approximately 23.1% of the ordinary shares. NZXR is satisfied that CDI will maintain a spread of security holders which is sufficient to ensure a liquid market;

Rule 5.2.3 A Class of Securities will generally not be considered for Quotation on the NZSX or NZDX unless those Securities are held by at least 500 Members of the Public holding at least 25% of the number of Securities of that Class issued, with each Member of the Public holding at least a Minimum Holding, and those requirements are maintained, or NZX is otherwise satisfied that the Issuer will maintain a spread of Security holders which is sufficient to ensure that there is a sufficiently liquid market in the Class of Securities.

Hi Vaygor1, it seems the requirement of the 25% public holding of shares and 500 members with minimum holdings is to assure an sufficient liquid market as pointed out above.
Although liquidity for CDI shares is limited I think it is not that low that it will be forced to stop trading. CDI is not quit making the 25% of public holding but the other requirement is met by more then a factor of 5.
If after a year the situation is more or less the same I would expect an extension of the exemption.

[Vaygor1]

Hi Forest.

I agree with you 100%, but the issue is more pertinent for MCK holders I guess. It must almost be a dead cert that MCK will be paid the dividend.

http://www.dictionary.com/browse/dead-cert …. <--- Not sure if this is a non-kiwi saying.

I do not hold or follow MCK at all. But if I did, would this info/knowledge be of any use to me at all? Probably not, but the question begs I suppose.

I thought about putting a link to these latest posts on the MCK thread but that thread is unbelievably quiet, not really worth the trouble.