But generally a warrant will not be eligible for dividends until it becomes a
share, so that fact must be taken into account when valuing the
warrant.
True>
> 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).
>
But the warrants are not worth zero.
DPC shareholders got these warrants at zero price (Bonus issue), so I am using this figure as a baseline. Also zero is a good baseline as the price can't fall below zero, just in case Dorchester gets itself in the crap between now and 2005. You have just told us they are
trading at 35c and 40c. So lets not get hung up on some theoretical
equivalent problem that does not exist.
In evaluatng future events all theoretical outcomes should be assessed. What may not exist now does not mean it may not exist in the future
If the current DPC share price is $2 as you told us...(continued).
>
> 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.
>
You are moving too fast for me Hoop! If you buy a DPC share today
you will pay $2. It is worth no more or less than exactly what you pay
for it on the market. I think you are assuming that if you buy DPC on
the market today you will somehow get an entitlement to DPCWA and
DPCWB as well. Not so
correct. If you buy 1 xDPC share on the market
today this is *all* you will get.
correct.......I know I have not explained this evaluation technque very well. I will try to explain again...The DPC share before ex is a different animal to that of the future 2006 DPC share. Therefore my analysis was to compare side by side the difference using present day price and correcting known change of factors, to obtain ....oh shit......Look!.... I will give a simple example...XYZ yesterday pre-ex price $1.00 ..today ex $0.60 (they gave 1:1 bonue issue). YesterdaysXYZ is a different animal to todays XYZ, relating back one day to the pre-ex that share was obviously worth not $1.00 but $1.20. ....Now relate this example to DPC, add warrant price, amount of possible extra shares ( dilution factor) and relate back from 2005-2006 to 2003 (present day). This will give you an insight to the price DPC would have to be under the expectations of the management if the warrants never existed. If the warrants never existed the market+ management expect the shareprice to be $3.07 in sept 2006. Now with this analysis, you have a basis to think ..is it possible DPC shares (if the warrants never happened) be worth $3.07 by Sept 2006. If the answer you think is yes you buy the warrants at 35 or 40 cents.......simple 
.
>
>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....
>
There is no such thing as the 'present day price before dilution'. The
shares have already gone ex-warrant and are effectively alreay diluted
because the warrants are separately listed already.
Only diluted when warrants are exercised. Dorchester being a growth company one would assume that most if not all the warrants will be converted to ordinary shares in both 2005 and 2006.
Perhaps you are talking about the theoretical past ex-price *before*
dilution?
No and yes depending on what you are thinking. $3.07 is the past ex price before dilution 2006, and this is the comparison we can work with against the DPC price now
If the three market prices immediately after the split are $2, 35c and
40c respectively that means the theoretical price before the split was
$2+0.35c+0.40c= $2.75.
Correct, so those investors who bought the day pre ex and sold the next day post ex would have gained $0.75/share profit .. 37% profit in one day. If you look at the turnover between the days, there was bugger all ,so there weren't many astute investors around that day (me included unfortunately).
>
>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.
>
Let's not introduce the time value of money into it right now. It is a
small effect and it is obscuring a simple clarity that you are trying to
grasp.
OK
The DPCWA warrant is worth 35c today , as you told us that is what
the market is willing to pay for it. You have to front up with $1.70 in
one
two years time. So you will be 'ahead' in holding your DPCWA
provided the head share price is at least $1.70 + 35c= $2.05 by then.
No & yes ...no because of the dilution factor, yes if the dilution factor is already factored in by the market by that date. How do you tell the difference ? Watch the price the next day post ex. It is either 
or 
.
Now lets bring the time value of money back into it. You don't have to
front up with that $1.70 for a whole year. If you put $1.63 in the bank
today at 4% interest you will end up with $1.70 in a years time (check it
out on your calculator).
yes I didn't factor that ...my money is not often in a bank, so that is my excuse for the oversight 
.
So the present day value of your DPCWA once it is paid up in a years
time will be $1.63+35c= $1.98. Notice that buying DPC today at $2 is
slightly more expensive than this. So the best deal is to buy DPCWA
today and stump up with $1.70 in a
2 years time. Y
our choice. Do not buy the DPC head share today, (all other things being equal and assuming a
'discount rate' of 4%).
Mmmmmm buying the head share has its advantages, The dividend which I have mentioned looks likely to be increased and the warrants are a long way a way + unforeseen incentives to keep the head share popular...who knows...
>
> 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 fact that each DPC was worth only $1 a year ago is of no
relevence at all.
True, as it was then undervalued by the market. However many investors do steer their financial car by looking in their rearview mirror, and as this company has very small quantity of tradable stock it does not attract bigger more knowledgeable investors...not yet anyway
If you don't think DPC will be worth $1.70 in one years time then sell
your DPCWA warrants now as they will be worthless if the head share
price drops below $1.70 a year out from here.
yes, if you think that..... DPC is a growth company, so I will be keeping my warrants...for the meantime anyway.>
>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,
>
What momentum? Haven't the warrants only been trading for a few
days? That is hardly enough time to build up any kind of momentum!.
The momentum of DPC head shares commenced before the bonus issue warrants were mentioned. I do not believe any inside information existed, An accumulation of good results forced a breakout of the shareprice. It had to happen sooner or later.
>
>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,
>
I don't know how you come to this estimated earnings payout, but I'll
take your word for it.
Thanks 
. It is usually mentioned in their annual report. However it was stated in their "Investment Statement For Warrants And Shares " leaflet posted out to all shareholders on the 22 Sept 2003.
>
>less alone at Sept 2005 or Sept 2006.
>
But by then there will be 10 million new shares - you just told us that.
So if the business has not changed significantly then whatever
earnings it has will have to be spread over 30million shares, not
20million. That means you can expect a dividend *cut* by then,
provided the business remains substantially unchanged.
True, the dilution factor at work after Sept 2005. However between Nov 2003 and June 2005 expect an increase in dividend yield.
>
> 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.
>
How rosy the future of DPC is depends on how wisely it uses that extra
money. And that is the great unknown. If you have confidence in their
business plan over the next two years you should do OK by just
holding on to all three: DPC, DPCWA and DPCWB.
Wise wordsSNOOPY
Thanks Snoopy , enjoyed the debate. 
oop--
Message sent by Snoopy
on Pegasus Mail version 4.02
----------------------------------
"Sometimes to see the wood from the trees,
you have to cut down all the trees."
----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/.
IncrediMail - Email has finally evolved - Click Here
See IRG research reports
