Dolphin Capital Investors: 24/09/13 update; Half year results to 30th June; patience required!

Tuesday, Jan 29 2013 by
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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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Dolphin Capital Investors Limited is a real estate investment company. The Company is focused on the early stage, large-scale leisure-integrated residential resorts in south-east Europe. The Company seeks to generate capital growth for its shareholders by acquiring seafront sites in the eastern Mediterranean, Caribbean and Latin America and establishing leisure-integrated residential resorts. As of December 31, 2011, Dolphin’s portfolio was spread over 63 million square meters of prime coastal developable land and consisted of 14 large scale, leisure-integrated residential resorts under development in Greece, Cyprus, Croatia, Turkey, Panama and the Dominican Republic and more than 60 smaller holiday home projects through Aristo Developers in Cyprus and Greece. As of December 31, 2011, the Company is 49.8% owner of Aristo Developers Ltd Dolphin is managed by Dolphin Capital Partners Limited(DCP), which is an independent real estate private equity management firm. more »

Share Price (AIM)
25.75p
Change
0.6  2.4%
P/E (fwd)
n/a
Yield (fwd)
n/a
Mkt Cap (£m)
165.4



  Is Dolphin Capital Investors fundamentally strong or weak? Find out More »


5 Comments on this Article show/hide all

johnrosier 12th Mar '13 1 of 5

Dolphin Capital Investors (35.46p and 2.8% of JIC portfolio); I have today increased the holding in Dolphin by 1% to 2.8% of the JIC portfolio. My reasons for buying the initial holding on 29th January are set out above. The shares have come back a little since that purchase and are due to announce results for the year ending 31st December 2012 next Wednesday the 20th March. The Company has been busy and today announced the "breaking ground" at its Playa Grande Amanresort and Golf Course in the Dominican Republic . I hope that the trading statement accompanying the results will get the shares moving in an upward direction!
I have taken profits in two holdings Laird and Telecity reducing them to 2.8% and 2.0% of the JIC portfolio respectively. (See transaction history)

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johnrosier 20th Mar '13 2 of 5
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Dolphin Capital Investors ( 37.5p and 3.0% of JIC Portfolio) published its 2012 annual results this morning. First the numbers; Net Asset Value at 31st December was €709m, down 1.6% on the 30th September figure principally due to "regular operating expenses". Sterling NAV increased slightly to 90p from 89p due to weakness in the currency. Gross assets stood at €910m with total debt of €132m. There is no debt at the Company level and it has only given guarantees on $40m Playa Grande convertible bonds and interest to Bank Leon on the same project. It has also announced today the issue of €50 million Euro Convertible Bonds convertible into DCI common shares which will increase net debt a little further. The Company says that this will give it flexibility to make "opportunistic investments in distressed assets that may be accretive to NAV" and also to" establish and seed a new investment platform to become the holding entity for the Company's Americas project".


A progress report is given on the Company's advanced projects. For details it is best to read the results announcement but suffice it to say they are making real progress in moving from the purely investment phase to realising the value of its assets. Projects such as the Amanzoe open for its first full season next week whilst others such as the Nikki Beach Resort and Playa Grande (Panama) are under construction.


Conclusion; In itself these results do not make much difference to the investment case. The shares currently stand at a 60% discount to net assets. My view is that 2013 could be a pivotal year for the Company as it moves projects into the operational stage and demonstrates real value in its asset base. Very Happy Holder!

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johnrosier 20th May '13 3 of 5

Dolphin Capital (38p and 4.4% of JIC) has announced that its 49.8% subsidiaries, Aristo Developers and Venus Rock estates have sold their interests in Venus Rock Golf Resort in Cyprus for €290m, which includes a €48.5m conditional deferred consideration payable within six months. It has been sold to a Hong Kong conglomerate and real estate Group. The €290m purchase price represents 22% discount to the latest valuation of €370m and as such is expected to result in Dolphins NAV per share after deferred income tax liabilities falling by 5.6% to 76p and Dolphins share of the net proceeds of the sale of c.€117m will represents a 1.41x return on its allocated €83m investment cost.

The proceeds of the sale will allow the repayment of project loans and the release of existing mortgages on Venus Rock properties (on other Aristo projects) . For Aristo, it will improves its sales capabilities by freeing up additional land and residential projects for sale, improve profitability as debt service costs fall and enable the Company to build on its market leadership in Cyprus.

Dolphin is also expected to receive a net amount of between €25m and€40m which it says could be utilised for working capital, project development, further acquisitions and share buy backs.

Conclusion: At first sight it may look a little disappointing to sell at a discount to NAV but this is Cyprus we are talking about! Cyprus has clearly gone through a difficult six months and for Dolphin to realise value in the Venus Rock Golf Resort in a manner that will give it working capital to develop its other property developments in Cyprus as well as a giving a boost to its Group cash reserves has got to be good news. After this transaction the shares stand at a 42% discount to the most conservative measure of calculated NAV as at 31st December 2012. The shares have been a bit perkier in recent weeks and I expect them to make further progress. Very Happy Holder.

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johnrosier 12th Jun '13 4 of 5
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Dolphin Capital (39p and 4.6% of JIC portfolio) has issued its NAV as at the end of March and a trading update for the period since its last update on March 20th.

First the NAV; At 31st March total Group NAV was €698m which was €10m below that of 31st December 2012. Regular operating expenses, offset partially by the appreciation in value of its American properties in € terms was responsible for the small fall. In Sterling terms there was a slight increase in NAV per share from 90p to 92p helped by a 3% appreciation of sterling verses the Euro. Following the issue of €50m convertible bond Group total debt to assets stood at only 19% with no debt at the Company level.

There is a comprehensive run through of progress at its various projects including the completion of two Aman Villas at the Amanzoe, construction work on three more proceeding and three more in the design stage. The Playa Grande in Dominican Republic received its first reservation agreement to a New York based purchaser for the sale of an Aman Villa. In Cyprus ,Aristo Developers, was unsurprisingly adversely affected by the banking problems in Cyprus, with 33 homes and plots sold in the 3 months to 31st May valued at €12.5m. This represented a 49% decrease in the number of units and a 15% fall in value.

The Company is pretty upbeat on prospects. The respective governments in both Cyprus and Greece have identified tourism and construction as areas of strategic importance and have passed laws favourable to these activities such as improved planning conditions and the granting of residence visas to property investors. These planning initiatives should enhance the profitability of the portfolio and the availability of residence visas in Greece is expected to be attractive to the Chinese market, as it has been in Cyprus. Dolphin Capital Americas is considering further NAV accretive acquisitions in the region and has identified a number of investments which could be complementary to its current portfolio.

Conclusion; Rather like my report on Agriterra yesterday the company is making steady progress but inevitably it is taking time to come through at the bottom line. It has spent much of the last 8 years in the investment stage. Only now are we starting to see some of the fruits of that labour as sales of properties pick up and resorts such as the Amanzoe become fully operational. The shares stand at a significant, (60% ish), discount to NAV. Narrowing that discount further will be dependent on the Company demonstrating progress realising value through the sale of villas, developing its resorts and pursuing joint ventures on attractive terms. Whilst the last seven years has been difficult for financial markets it has not been a bad time for buying development land. It is to be hoped that the market conditions over the next five years will prove helpful to Dolphin as it realises value from its portfolio. Patient Holder!

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johnrosier 24th Sep '13 5 of 5

24th September 2013


Dolphin Capital (37.5p and 3.9% of JIC Portfolio) Half year results to 30th June 2013. After a long list of operating highlights, transaction highlights etc., etc. we finally get to the financial highlights which show total Group NAV at 30th June at €613m which represents a 3% drop since 31st March and a 13.5% drop since 31st December 2012! The balance sheet remains strong with net debt of €178m on Gross Assets of €869m.


I confess to be being a little underwhelmed with these results. The Company seems to be very active operationally but when it comes to financial results the NAV seems to be drifting with each announcement. May be I am being a little impatient but progress at demonstrating value in its portfolio does seem to be painfully slow. At 37.5p the shares are valued at roughly half sterling NAV of 73p (after deferred income tax liabilities), but since February this year the discount has been getting narrower due to the NAV falling rather than the share price appreciating. To be fair, much of the fall in the NAV was due to the sale of its interest in the Venus Rock project in Cyprus announced in May, payment for which they are still awaiting.


Conclusion: When I compare this to some of my other investments such as Regenersis (up 5.4% today) and Vislink, where the share price reacts positively to good results I can’t help but feel my money could be better deployed elsewhere! This is a difficult one and after much deliberation I have decided to give the Company the benefit of the doubt and hang for the time being given the huge potential for NAV and share price accretion. I need, however, to see some progress and will being watching the share price very closely!


Hopefully next week’s annual Investor Conference at the Amanzoe resort at Porto Heli, Greece and today’s appointment of LCF Edmond de Rothschild Securities as joint broker to the Company, will introduce new investors to the Company and have a positive effect on the share price!

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About johnrosier

Johnrosier

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I manage my subscription website  www.JohnsInvestmentChronicle.com in which I show my portfolio and all transactions. I blog within an hour of trading, with an explanation, and send an alert email to all may subscribers. I do not pretend to have all the answers but I hope my portfolio, and the trades, provides food for thought as well as helping those who are new to managing their own portfolios.I think what I do is unique. There are plenty of tipsters out there who will remind you of the good ones and quietly forget the duffers; I do not have that luxury as the portfolio is there for all to see. I have to confront my mistakes and deal with them. A tipster also does not show how a tip fits into the context of an overall portfolio. My portfolio of up to 30 holdings has different holding sizes based on my conviction behind the stock and its risk. I set up www.JohnsInvestmentChronicle.com in January 2012. Prior to that :In September 1984, I left university with a degree in Zoology and started work in the City of London. Over the next twenty five years most of my time was spent managing UK equity portfolios with Fleming Investment Management and Henderson Global Investors, for company and local authority pension schemes as well as the reserve fund for a well known charity. During 2009 I left full time employment and decided to take time out to consider the next stage of my career. In the meantime I have been putting my years of experience to good use investing the family savings. I have thoroughly enjoyed the freedom of investing from home and despite some tricky periods during 2011 it has been a rewarding experience.  more »



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