Dolphin Capital Investors (LON:DCI) (36p and 2.0% of JIC portfolio) I have this morning invested 2.0% of the JIC portfolio in Dolphin Capital Investors. The Company invests in the residential resort sector and has a coastal land portfolio located in the Eastern Mediterranean, the Caribbean and Latin America. It has fourteen major projects of which five are under construction, selling lots and residences. The current development plan includes 22 hotels, 8 gold courses, 5 marinas and over 10,000 residential units. Amanzoe , the first green field resort completed by Dolphin in August 2012 has already been recognised as probably the best resort in the Med.
I bought the holding following a meeting with the founding partner, Pierre Charalambides and Managing Partner, Miltos Kambourides yesterday. I first met them in 2005 when Dolphin was listed on the AIM market raising £70.7m at 64p per share. In its early days the shares performed well as the Company built up a land bank for future development. Along came the banking crises and the economic troubles in Greece and the shares which had peaked at 180p in June 2007 dropped back to the mid teens by 2012.
In October last year it raised €50m of new equity and gained some important new shareholders. The cash raising was underwritten by Third Point LLC, (the founder of which, Daniel Loeb, you may remember exposed the CEO of Yahoo for "embroidering" his cv, forcing him to step down) which ended up with a 20.18% stake. Other shareholders include BlackRock Investment Management (11.9%), Fortress Investment Group (8.3%) Tosca (5.5%) Telford International (5.4%) and J O Hambro Capital Management (5.04%). The cash raised gives the Company greater head room before it becomes cash flow positive, through realising the potential of its asset base, by both selling development lots and properties and perhaps selling a share in some of its projects.
At 36p it is currently valued at €265m. The Company believes it has the potential for a cash return of €4.2bn over the coming 12 years with the first phase of projects releasing €530m over the next 5-6 years . The latest published NAV per share is 89p as at 30th September 2012. The Company's balance sheet is lowly geared with gross assets of €898 million, total debt of €140 million giving a Group total debt to asset value ratio of only 16%. There is no bank debt at the Company level although the Company has provided corporate guarantees on the Playa Grande Convertible Bonds ($40m) and the servicing of Banco Leon loan interest at Playa Grande.
Conclusion: I liked the management when I first met them back in 2005. Since then they have managed to build a business with massive potential during an extremely difficult period. Clearly there are risks ahead in terms of Dolphin struggling to make sales but I tend to take the view that we are through the worst of it. In any case, in my view the shares at a 60% discount to net assets reflect these concerns. The shares have started to recover and although I kick myself that I wasn't a little more on the ball back in September when the shares were below 20p I believe that the shares can further close the discount to net asset value as 2013 progresses. I have bought 2.0% to start with which I have funded by realising some profits in Intermediate Capital and Jupiter Fund Management, reducing the former to 3.0% and the latter to 4%. (see transaction history). www.johnsinvestmentchronicle.com
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