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Re: [sharechat] Dorchester Pacific's Warrants


From: "Richard Hooper" <hoop@ihug.co.nz>
Date: Wed, 24 Sep 2003 12:01:22 +1200 (New Zealand Standard Time)


Hi Dean,
With all shares there is a risk that the management will collectively have a brain implosion. One of the main reasons I bought DPC shares was the excellent performance by management. I have no reason to change my mind at present.
I am not sure, but I recollect that the first float is for 31 million shares @ 50c = $15.5M, correct me if I'm wrong. This is a little less than $45M . I have no knowledge of how underwriting works, and I must confess that I hadn't looked at the angle of 42 Below being a total flop, partial flop ..yes. 
 
42 Below float, personally has not excited me, and from what I hear not many others seem excted either. Yes I think there is a risk for DPC, but a manageable one, otherwise I presume Brent King & Co would not have gone ahead. Brent King's image comes across as a steady as it goes, quiet, shrewd businessman, not a rip, shit & bust vocal "lets get rich quick type. DPC have dealt in other ventures in the past with mixed results and their overall profits have still grown each year. So overall I am not worried........yet.
oop
 
-------Original Message-------
 
Date: Wednesday, September 24, 2003 10:18:25
Subject: Re: [sharechat] Dorchester Pacific's Warrants
 
Hi Hoop
 
Am a bit worried because DPC owns Direct Broking who are underwriters of the 42 below share float - I think they are trying to raise about $45m.  What do you think may happen if the float is a flop? DPC may be forced to take up a considerable amount of the issue.  Personally I don't think the issue is a good one so there may be a bit of risk here.  What do you think?
 
Cheers Dean
 
disc hold DPC 
 
----- Original Message -----
Sent: Tuesday, 23 September 2003 23:28
Subject: [sharechat] Dorchester Pacific's Warrants

Hi all happy sharechatters,....
oh alright..... grumpy chatters too.
 
Dorchester Pacific shareholders got bonus issue warrants (ex19th Sept) 1:4 DPCWA and 1:4 DPCWB.
     On the other channel some writers consensus were, that once the warrants were issued the head share DPC would fall back in price. This has not happened ,as yet. The demand for scarce stock I suspect is keeping the price up.
     I was particularly interested in the price paid for DPCWA 35cents and DPCWB at 40cents, albeit at bugger all volume. I assume there are no warrants trading on the market as the buy bid is 36c and sell bid is 35c, this pricing is illogical hence the assumption.
 
If you do the sums many other things on the surface,seem at first, beyond belief. DPC last traded today @ $2.03 ( ex), for mathematical purposes say $2 (ex warrants).
 
By Sept 2006 there will be another 10 million ( 5m Sept 2005 + 5m Sept 2006) to add to the 20million shares on issue, so effectively with both warrants all successfully converted @ $1.70, in theory at present day price the DPC share is worth $2.55 (if the warrants are worth zero).
 However the market is seeing this differently at present with the warrants worth around say 35c.......35c + $1.70 = $2.05 is what (an) investor (s) is seeing at present. If this becomes reality, this values DPC at present day price at $3.07.
 
 So if any investor buys these warrants for say 35c now. The present day price (before dilution) has to be $3.07 + interest earned if money in the bank say 4% 1.4c x 2 years(or 3) = $3.10. This is the price DPC ( undiluted of 2005 Warrants) has to be in Sept 2006 for that investor to break even.
 
The burning question is ...is DPC going to be worth that amount considering that the market only valued the stock at a $1 last year. Answer ...don't know.
 
The facts .......DPC being a small stock usually gets forgotten, hence $1 around 2001-2002 when it should had been $1.60 at least. At present It has lost its forgotten status.The recent price surge from $1.40 - $2.18 and back to $2.03 is demand driven. What factor (or factors) is causing the demand?
 
Factor 1 ...Investors waking up to a hugely undervalued stock in short supply.
Factor 2....Bonus issue of the warrants.
Factor 3....Selling its pet poodle, Sterling Portfolio Management Ltd to Spices (a wholly owned subsidiary of AXA). 
 
I have a feeling Factor 3 is not a key driver in this momentum, BUT, it will have the biggest impact fundamentally as Sterling sucked about $2M/annum. I will therefore estimated that the 1/2 year result for DPC expected to be released in mid Nov 2003 will be $1.7m + the extra saving from sterling of $1m = $2.6m ( 2002 ..$1.462m) an increase of 78%.
 
 DPC management usually has a 40% dividend payout  policy. So, with status quo, I estimate, $2.6M /20M shares X 40% = Dividend of 5.2cents (2002..3.6cents).
 
Therefore, on my estimated 10cents per year dividend payout on a growth share... $3 a share is not beyond belief, and this is after Nov 2003, less alone at Sept 2005 or Sept 2006.
 
DPC has had a remarkable growth period during the last 6 years within the financial sector, and with the possible extra money it will receive with the warrant conversion ( $17millon),with great management, the future for DPC is looking very rosy.
oop
Disc:  own DPC, DPCWA, DPCWB 
 
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