Donegal Creameries (DCP:ID)

Wexboy_Value

Donegal Creameries – Low Fat Diet


Last week, I published a surprisingly popular post: I identified myself as an activist investor, rather than necessarily a value investor (or, heaven forbid, a growth investor!). I meant this in the broadest sense – an activist investor sees a v different company & valuation to the one which currently exists (in the minds of most investors). That obviously implies a corporate transformation – and catalysts are a great way to ensure it occurs. Hopefully, you’ve noticed this approach in a number of my previous investment write-ups, but I also promised a brand new example! So, without further ado, let me introduce:

Donegal Creameries plc (DCP:ID)

OK, let’s just dive right in – here’s a snapshot of their last 5 years:

[See here for links, charts, etc: http://wexboy.wordpress.com/2013/05/05/donegal-creameries-low-fat-diet/]

Donegal I

Ugh, that’s enough to make any investor lactose intolerant..! Revenues have declined 38% over the last 5 years – not surprisingly, cumulative operating profit (OP) is a puny EUR 0.5 mio, while net income’s not much better at EUR 3.1 mio. In per share terms, it looks worse: Net asset value (NAV) declined 12% – even if we add-back dividends, shareholders only earned 1% for the entire period. At this point, we can safely assume the majority of investors (value, or growth) have already discarded Donegal, probably for years to come, as a potential investment…

But I confess, I cheated a little on the table above: All the figures are genuine, but I neglected to mention the sale of a major division in Oct-2011. And Donegal’s suffered significant investment property write-downs. Of course, a smaller minority of investors will have insisted on reading through the annual reports – here’s a (brief) revised snapshot of what they’d find:

Donegal II

Segmental reporting doesn’t allow me to go back further, but I’ve restated 2010 revenues to exclude discontinued operations. This shows a healthy 15% revenue growth for continuing ops. in 2011-12. However, there seems little overall change in adjusted OP (on a pre-exceptionals/write-downs & continuing ops. basis), despite the sale. In valuation terms, averages probably make more sense here – adj. OP averaged EUR 3.3 mio, while average adj. EPS was EUR 0.512.

So, what would our value investor make of this? Well, we could value this six ways from Sunday, assuming debt’s at a manageable level (which I think it is), but let’s keep it simple: I’d expect most investors would come out somewhere between an 8 P/E (on avg. EPS) & a 1.0 P/B. On average, that works out to a EUR 4.92 target price. That’s a 14% discount to NAV, and offers an upside potential of 36% – not so shabby, but certainly not a story/valuation that would really set a value investor’s heart aflutter…

And what about our growth investor? Oh Jesus – he’s fallen asleep at the wheel, spun off the road, and now his car’s ablaze. Not even a milk tanker full of water could save him. Rumour has it, he hated the stock from the minute he heard its bloody name…

But as for me, I can’t stop thinking about Donegal Creameries in the past year. Because I see a v different company hiding inside this wallflower…

I trace this back to the sale of its dairy & agri-stores business in late 2011. This was a seismic event – Donegal’s dairy roots go back a century. Don’t under-estimate the bravery of a board who overturns that much history… Or how smart they were: i) realizing up to EUR 21 mio in cash from a low/volatile margin business, and ii) dodging the looming abolition of EU milk quotas in 2015, which would require a large & probably uneconomic investment in processing capacity. [I wrote about this recently re Glanbia (GLB:ID). btw I'm thoroughly bemused by GLB's current (adj cont) P/E ratio of 20.7, while DCP's is only 8.2!?] This major sale is a catalyst that’s propelled Donegal down an (irreversible) path to eventual transformation. And I happen to think the story will end with another major sale also…

I guess you could also describe the sale as a crash diet for Donegal – a great decision & a great result. But as we know, crash diets don’t work – what’s really needed here is a long-term diet & exercise plan to cut the fat & tone the muscle. Pull up a chair & crack a beer, let’s see what that looks like:

[NB: Donegal's 2012 final results were released, but their annual report isn't out 'til June - I may rely on the 2011 report & notes for certain info. & assumptions. btw If you'd like a copy of the Excel file I'm using here, just email me].

Company Name: The name’s probably worth a 20% discount on the bloody share price! Not to mention it’s misleading – sure, they still have a yogurt business, but they couldn’t be remotely described as a creamery. Time to cut the fat & change it to something like Donegal Group. Or even Donegal (why not visit?!), which has an appealing simplicity.

The Board: The company had 26 directors in 2005, and was still sporting 13 in their last annual report! This is an absurd Irish agricultural legacy. As any farmer knows, a healthy cull is needed now & again. The company’s forging ahead on a new path, so retiring all farmers & 10 yrs+ directors makes sense. That just leaves Ian Ireland (MD) & Michael Griffin, both ex-Kerry Group (KYG:ID) men, in situ. Considering Donegal’s size, 5 directors seems reasonable – so a new Chairman, FD (as promised) & 1 NED would be required. I estimate an annual EUR 102 K saving.

And the company’s now 40% smaller than mid-2011, in revenue terms. While some functions aren’t scaleable, a 20% HQ reduction seems appropriate. I can’t confirm this occurred in 2012…I shall assume not: The 2011 report appears to list 15 HQ employees (ex-MD & FD), so EUR 226 K of annual savings looks achievable. Other G&A savings may also be possible.

Speciality Value Added Dairy: Donegal continues to invest in its (primarily) premium yogurt business, consisting of The Different Dairy Company, Biogreen & Chef in a Box. Unfortunately, ‘invest‘ is often corporate-speak for ‘lose money‘… The 2011 segment result was EUR (1.4) mio & losses accelerated for the last 12 months (LTM) to EUR (1.9) mio (as of mid-2012). While some losses may be attributable to the Organic for Us brand (recently divested), the division’s abrupt absorption into a new/larger Food-Agri segment doesn’t bode well. Super-charged revenue growth might have compensated, but unfortunately mid-2012 LTM revenues were only 13% ahead of 2010.

Potentially this is an attractive business, but even if losses were reduced or eliminated, it seems obvious margins would always remain under threat & inferior to larger dairy/food companies. In fact, in the hands of a rival, I’m sure revenues could quickly double, on (say) a 10-20% margin – that’s a business easily worth a 1.33 Price/Sales (P/S) multiple. Of course, right now, it’s arguably worth nothing. Despite its key strategic status, it’s better off sold…

The Rumblers & Good Heavens brands may well be worth more, but let’s assume a rival shares only a fraction of the potential upside with Donegal. Say, 20% of mid-2012 LTM revenues (EUR 9.2 mio) – that’s a possible EUR 2.5 mio cash consideration received within the next year. Obviously, the real benefit here is the elimination of losses & the exposure of Donegal’s underlying profitability.

Stevedoring: Far less exotic than it sounds, and I’m sure there’s little need to make a disposal argument here! Donegal owns 75% of McCorkell Holdings, based in Derry, and 2011 revenues of EUR 1.3 mio are representative of the last few years. Operating profitability’s break-even, on average, but I suspect the book value of GBP 1.4 mio is understated. Obviously, the small size dictates an employee/local sale, so let’s assume 75% of book (EUR 1.3 mio) is harvested within 2 years.

Trade Receivables: Total receivables are EUR 38.6 mio at end-2012, and I estimate EUR 33.6 mio are trade receivables. This represents 5.0 months of revenues!? These are extraordinarily generous terms – they tie up surplus shareholder capital, and I’d argue longer terms actually increases the risk of non-payment. A company-wide programme (over two yrs) to gradually introduce average 3 mth terms is the obvious remedy. This would release EUR 13.5 mio of surplus cash, and I believe terms are still generous enough not to impact business or customer relationships in any significant way. We can also count the release of a EUR 2.5 mio contingent earn-out (from the dairy/agri-stores sale) which was received subsequent to yr-end 2012.

Other Investments: There are a number of legacy investments on the balance sheet. They include EUR 49 K of quoted shares, EUR 100 K of prize bonds, and EUR 518 K of unquoted shares (primarily in One 51). With the recent rally to EUR 0.38 in One 51 shares (vs. EUR 0.15 as of yr-end), these investments can be sold/redeemed for EUR 1.2 mio in the next year.

Investment Property: Donegal now has EUR 25.7 mio of investment property on the books, down from EUR 41.8 mio at end-2008 after 4 years of write-downs. Anybody acquainted with the Irish property collapse will find this a surprisingly mild decline… But Donegal’s investment property & valuations are mostly agricultural, and Irish land values in the west/north west fell by approx. 36% since 2008. We have enough detail, broadly speaking, to assemble our own valuation here:

- An Grianan Estate: An Grianan’s 3,000 acres makes it probably the largest farm in Ireland. Unlike much of the land in Donegal, it’s fertile & relatively flat. Checking ‘cross the web, I can’t determine if the 500 acre Inch Lake is within/additional to the total acreage. But lakes don’t necessarily come free anyway (just ask our economically exploited American cousins), so let’s split the difference & assume a 2,750 acre farm size. A valuation at least equal to Donegal’s latest average price of EUR 8,864 per acre is justified, and its 415,000 gallon milk quota might sell for 13 cts per litre – for a grand total of EUR 24.6 mio.

- Ballyraine Campus: Student residential property near LYIT. If I understand correctly, Ballyraine was initially valued at EUR 3.75 mio after its 2003-04 construction. It caters for up to 226 students, at a minimum rental per person of EUR 55 per week (higher rates are charged for summer rentals). No matter how I juggle figures & assumptions, based on a long-term 7.8% average residential yield, I can arrive at that same EUR 3.75 mio valuation at a bare minimum. [NB: Donegal's valuation assumption is a conservative 9-10% yield. Taking a medium term view on highly reliable student accommodation, substituting a long-term 7.8% yield seems reasonable].

- Oatfield Building: The Oatfield building was retained & valued at EUR 3.25 mio in 2007, when Donegal sold Oatfield Confectionery. It’s difficult to determine if this asset’s now a (potential) commercial or development property. Irish commercial prices are down (say) 60%, while some development assets have declined up to 90%. Let’s assume a cumulative 75% loss in value, which leaves a residual value of EUR 0.8 mio.

- Agri-Stores/Other: In 2007, Donegal bought a property in Bridgend for EUR 0.8 mio. Let’s assume a 75% write-down to EUR 0.2 mio for this property. Also, while the agri-stores business was disposed of at end-2011, 9 agri-store freeholds were retained (at a EUR 1.5 mio valuation). Let’s now assume a 10% decline since to EUR 1.4 mio.

That’s a grand total of EUR 30.7 mio – wow, I never expected to be the one marking up Irish property..!? That’s EUR 5.1 mio in excess of Donegal’s own valuation. But I can live with that – when it comes to write-downs, companies are usually in denial long after the peak, and then throw the baby out with the bath-water… Anyway, I’m certainly not going to suggest all this property could be sold tomorrow at that kind of valuation! But I do think management can cherry-pick half the assets & slowly but surely sell them over the next 5 years (at book value, or better). That’s only EUR 3.1 mio in sales a year.

And should I remind you around 80% of this property’s agricultural, and Irish agricultural land’s actually in a (mild) bull market again (since 2010 & further gains are expected)?! Shocked? You shouldn’t be, UK & US farmland both acted like there was never a bloody financial crisis & have enjoyed v healthy bull markets for years now. Which Irish farmland would have happily joined, but first had to deal with the excesses of 2006-07, when developers chased up land prices to ludicrous levels.

All that’s really needed is a gradual carve-up of An Grianan - the time for sentimentality, or death threats (?!), is long gone now. Or the Donegal execs. could have a little fun. This summer, they should take a first-class trip, drinking their way across the US – all they need to do is find one US billionaire pining for his Irish roots. Considering the size of the land purchases some of these guys are making, buying An Grianan in its entirety would be a mere breakfast bagel with their pot of morning-after black coffee…

One final point – there was a EUR 3.3 mio deferred tax liability against investment property in 2011. I’ll add an additional EUR 1.7 mio, to reflect my incremental valuation, which increases the liability to EUR 5.0 mio.

Associate Loans/Investments: Donegal has a 22.4% stake in Northwestern Livestock Holdings, which owns development land that was worth a bloody fortune in the bubble years. Unfortunately, significant debt was also taken on, and as prices & prospects collapsed the company spiralled into negative equity. Let’s presume the equity’s worthless, and I suspect Donegal’s loan to NWH will ultimately prove irrecoverable. There’s also a 42.7% stake in Leapgrange, which owns forestry – net assets in 2009 were EUR 0.8 mio, so I think Donegal’s EUR 0.3 mio holding remains intact as a long-term asset. Then there’s a Monagahan Middlebrook Mushrooms EUR 0.5 mio loan (after a EUR 0.8 mio repayment in 2012), which will be repaid in the next year.

Debt: Total debt now stands at EUR 22.0 mio – I believe only a slight reduction in debt’s required, to EUR 16.2 mio (I’ll explain below). Therefore, EUR 5.9 mio of the cash proceeds detailed above will be earmarked for debt reduction, at some point. And while we’re mentioning debt, it’s worth highlighting: i) fortunately, Donegal has no legacy pension deficit issues, and ii) all other/remaining balance sheet assets/liabilities (i.e. those not carved out above) are assumed to be part & parcel of any valuation/sale of the operating businesses.

Other Operating Divisions:

- Agri-Inputs: After the sale of the agri-stores, this division now consists solely of the Smyths Daleside animal feed business. I actually like this business – it’s a steady earner & has little correlation with the economy. In fact, it’s negatively correlated with the weather – v handy when you have other companies complaining about said weather (and I don’t even buy retailers!). Unfortunately, it’s a pretty low-margin business: With Donegal’s annoying habit of chopping & changing segments, we’ve only 2 years (2010-11) of stand-alone financial data to rely on here. 2010 revenues were EUR 25.1 mio & OP was EUR 1.0 mio, and 2011 improved to EUR 27.7 mio & EUR 1.2 mio, for an average OP margin of 4.2%.

This is actually head & shoulders above the industry – look at Ridley (RCL:CN), Carr’s Milling Industries (CRM:LN) & Wynnstay Group (WYN:LN). In the past few years, their animal feed segment margins have only averaged 2.2% (2.6%, exc. WYN). Good news, but it also suggests little scope for Donegal to improve margins, whether organic or acquisition-led. This probably explains why they’ve tagged it as non-strategic.

Which may be marvelous timing, as the weather turned 2012 into a banner year. The animal feed business isn’t broken out for last year, but I suspect revenues jumped 30%+ & OP perhaps doubled! Those figures may well get discounted, but this offers the perfect set-up to sell the business in 2013. But I think a sale makes most sense coupled with a specific plan to bulk up the produce business.

- Produce: The produce business is solely focused on their proprietary seed potato business which exports to over 40 countries world-wide. The company sums it up far better than I could: ‘The Board remains confident in the strong growth potential of the Group’s core seed potato business underpinned by increased demand for food from global population growth, the westernisation of diets in emerging markets and issues around water availability [potatoes produce more carbohydrate per unit of water than most global carbohydrate staples]. All of these will enable the Group to become a leading global player in its core seed potato business. Overall, our seed potato business, is a high growth business generating strong operating profit margins, has low capital expenditure requirements and yields consistently strong returns on capital. It will be the key strategic focus for the Group going forward.‘ Here’s the business over the past 5 years:

Donegal Produce

2012 was an obvious bad weather outlier – I think we can be confident of continued revenue growth, and a return to/improvement on their peak 10.6% OP margin. There’s v little in the way of listed-peer companies globally – I think KWS Saat (KWS:GR) is the best example, and nicely illustrates (see p. 3 of their latest annual report) the possible growth & margin expansion opportunities ahead for Donegal.

- Valuation: For Agri-Inputs, I’ll assume last year was a total outlier, and use 2011 revenues & an average 4.2% OP margin. [This is a place-holder valuation - ideally the business is sold to fund a Produce acquisition]. For Produce, I’ll take 2012 revenues & presume the former peak OP margin of 10.6% is quickly restored. We then include EUR 0.3 mio of identified board & HQ savings, plus some v minor unallocated expenses. Here’s a pro-forma P&L:

Donegal Agri Produce

You’ll note EUR 16.2 mio of Donegal’s current debt would enjoy 10.0 times interest coverage. That level of debt’s sustainable, and I believe a company with an 8.2% OP margin is fairly valued (and could be sold, complete with debt transfer) at a 0.7 P/S multiple. That’s a EUR 43.2 mio fair value – which equates (assuming a 12.5% tax rate) to a reasonable 10.9 P/E.

Monaghan Middlebrook Mushrooms (MMM): I thought I’d save the best ’til last..! Donegal has a 35% stake in MMM, which is now the second largest mushroom producer in the world. MMM’s founder & CEO, Ronnie Wilson, started the company in 1981 & has expanded into the UK, Europe & N America. In 2011, with GIMV (GIMB:BB), MMM acquired Walkro International, the largest producer of substrate for the mushroom industry in Europe. Just last month, they also acquired Prime Champ Group out of bankruptcy.

Turnover’s grown dramatically over the years – in 2011, I estimated revenues were about EUR 300 mio. But Donegal has now published a share of revenue for associates figure for the first time – which implies MMM’s turnover actually soared to EUR 429 mio in 2012 (benefiting from acquisitions & an improved UK market). Beyond that, we’ve little in the way of financial statements, though we can make some reasonable inferences about profitability over the years. But I’m not sure how helpful that would be – MMM’s clearly run for growth, and margins may well be compressed to ‘fund‘ that growth. But this is a familiar story – companies inevitably reach a point (often post-IPO) where a more measured growth strategy rapidly captures that underlying margin potential.

If we look to Produce Investments (PIL:LN) (which grows & sells potatoes), we see it’s having a bad year, but its OP margin normally averages around 4.4%. There’s really no listed mushroom producers (except some Japanese companies – probably not the best peer-comparison, but check out Hokuto (1379:JP) if you wish). But I think Camposol Holding (CSOL:NO) (the world’s largest producer of asparagus & avocados) & Webster (WBA:AU) are valuable read-throughs & suggest 10% operating margins are ultimately achievable. Consider the more complex mushroom production process, their superior weight:value ratio, and far shorter shelf life, plus MMM’s market dominance (in the UK & Ireland) – and a significantly higher operating margin than potatoes certainly seems justified. On the other hand, at this point, let’s not assume industry-leading margins either. Splitting the difference makes sense here, which would imply a 7.2% operating margin.

I’d suggest a 0.6 P/S multiple’s now appropriate for Monaghan Middlebrook. But note Donegal’s granted an option on 5% of MMM to the CEO & senior execs. – this was for 5 years ending in Dec-2011, but oddly enough doesn’t appear to be expired or exercised yet. Presuming their stake does end up to be 30%, Donegal’s holding is worth EUR 77.2 mio. I hardly need to highlight this is a multiple of its recorded book value, and Donegal’s own market cap…

Cash & Share Buyback/Tenders: Consider the scale of the potential cash generation implied above, and Donegal’s equally large discount to intrinsic value… A strategy of shrinking their outstanding share count is often the simplest & best way for companies to utilize cash, return capital & enhance shareholder value. In this instance, share buybacks & tenders clearly offer the most compelling & attractive utilization of all cash raised (except EUR 5.9 mio for debt reduction).

I shall assume the share price increases 60% in the next year & continues to increase at half that growth rate (30%) for the following 4 years. Disagree? Think the share price will increase at a slower pace? Wonderful – all the better for share buybacks! Expect a faster pace? Great, you’ve also made my day..! ;-)

Now it’s time to piece this all together:

Donegal Val I

This shows the next 5 years of net cash generation, plus the valuation of all remaining net assets at the end of the period. Let’s see what happens to the share count:

Donegal Val II

We’ve a final valuation of EUR 131 mio for Donegal, while the vast majority of cash generation’s been utilized to reduce the outstanding share count by 55% to 4.6 mio. The only new addition to the analysis is 5 yrs of dividends, which I think is a reasonable assumption. We therefore arrive at a final valuation, in 5 years time, of EUR 29.39 per share. Did you just choke on your beer? Yeah, so did I! ;-) That price target might strike you as extraordinarily ambitious – it may take a minute…but hark, I think I hear some big ifs & buts coming?! Let me make a suggestion – we’re talking about a potential incremental value of EUR 25.76 vs. the current share price. How about we slice that in half & meet in the middle? That implies a EUR 16.51 Fair Value per share, which offers an Upside Potential of 355%. [You'll note it also equals the projected share price above, using my assumed 60% & 30% growth rates].

But let’s return to the idea of the activist investor perspective – you’ll notice the great majority of my assumptions & valuation are firmly embedded in the present, even though I allow five years for this value to be realized. Nowhere do I rely on (or even include) future operating cash generation or revenue growth. In fact, the only real reason for the 5 year time horizon is: i) to allow a measured sale of investment property, which remains a difficult proposition, and ii) to cover my bloody ass – if I’m wildly off on (say) the valuation of MMM, I’ve five years of probable growth ahead to bail me out!

It’s also worth noting this isn’t about dismembering Donegal – the company still has all the available resources required for continued healthy growth of its core operating business. However, if I can see this inherent value as an investor, I’m sure there’s also a corporate or financial buyer out there who sees it too & might be tempted to come along & harvest it. But there may be a buyer far closer to home, anyway…

Ronnie Wilson is in his mid-60s now, he’s been building MMM into a global player for over three decades, and I’m sure he wants to secure his legacy & his family’s financial future. A public listing’s probably an increasingly logical & appealing option at this point. Of course, engineering a reverse-takeover of Donegal is a quick & easy way of achieving that… Followed by a placing to raise visibility with investors, to cash in part of his stake (but investors would obviously want to see him remain on-board – I’m sure he has no plans to retire anyway!), and perhaps to raise new cash for acquisitions & investment. [Ideally, Donegal's focused its resources solely on Produce at that point - a possible take-out of Produce Investments (PIL:LN) could then be a great way for MMM to create a second vertical in potatoes]. And if not an IPO, a trade sale’s an increasingly likely alternative for MMM – clearly that would also be another value creation catalyst for Donegal.

Of course, you may just argue none of the above might happen… But let me return to my original catalyst - the sale of Donegal’s dairy & agri-stores business. As I’ve said, I believe this has set the company travelling down an irreversible path – and who’s to say management doesn’t already know exactly where this leads? They’ve already been buying back shares this year, albeit on a v tentative basis – but for a small Irish company, that’s actually quite extraordinary. They already have investment property for sale – here & here, for example. And here’s their latest commentary on strategy: ‘During 2013 the Group will continue to review options to release capital from its non-strategic businesses and assets with the objective of focusing financial and management resources on the strategic areas of seed potato, value added dairy and associate investments, and so deliver value for our shareholders.‘

And why on earth wouldn’t management want to capture the potential upside I’ve highlighted here?! As of the last annual report, directors own 6.7% of the company. This includes the CEO, Ian Ireland, who’s bought shares in the open market quite regularly (as have other board members) & now owns a EUR 0.5 mio or 1.3% stake. Then there’s all the current & prospective shareholders: Thanks to Google, many will find & read this article in due course – and even if they disagree with me significantly, I’m sure they’ll still be keen to chase up management by post, email, phone & in person to discuss how shareholder value can be maximized. In fact, probably the best thing shareholders could do is support a new option programme for the CEO & board – awards should be far more generous (but based on a strike price substantially higher than today’s share price), if they’re intended to incentivize management appropriately.

I now own a 5.33% portfolio stake in Donegal Creameries.

Donegal Creameries (DCP:ID): EUR 3.63
Market Cap: EUR 36.7 mio
Dividend Yield: 4.4%
P/E: 8.2 (adjusted EPS)
Price/Sales: 0.46
Price/Book: 0.63

Tgt Mkt Cap: EUR 75.7 mio (based on a reduced share count)
Tgt Fair Value: EUR 16.51
Upside Potential: 355%

Fitz123

Great article Wexboy, stock had a nice move up after your blog post.

Are you planning to write your thoughts to Ian Ireland ala Argo or just wait and see ?

the groutch

Step 1: Buy over a million euro worth of shares
Step 2: Talk up company with first ever post on boards.ie
Step 3: Profit

Fitz123

No offence Groutch, have you read any of wexboys blog (http://wexboy.wordpress.com) ?

If you haven't you should, some of the best writing on Irish shares at the moment. He has been writing about Irish shares for quite some time. The above post is straight from his blog and provides better analysis on a company than the usual will I invest in the 3.30 in Kempton or AIB kind of posts that are all too popular here.

arrowloopboy

the groutch wrote: »

Step 1: Buy over a million euro worth of shares
Step 2: Talk up company with first ever post on boards.ie
Step 3: Profit

I think if I was going to go with your approach,it wouldn't be boards i'd be useing.
Mostly the over leveridged /under funded and demo traders on here I think.

Grecco

Fitz123 wrote: »

No offence Groutch, have you read any of wexboys blog (http://wexboy.wordpress.com) ?

If you haven't you should, some of the best writing on Irish shares at the moment. He has been writing about Irish shares for quite some time. The above post is straight from his blog and provides better analysis on a company than the usual .

Ah come on, some of his analysis have been piss poor.
Take his latest on Glanbia, he trashed them last year when they were around €3.80, said they were an overvalued Milk based dairy. Failed to see that the milk business was no longer there core product and that they were a major food ingredient and health food supplier. That was last year, this year he spouted the same sh1te but lucky for the rest of us (me included since €3.25 a share) its still on the way up, currently at €10.90 and making a bee-line to €15

As for Donegal Creameries, don't believe a word of it.
As for Wexboy, I believe he`s a from the far side of the big pond not your nice local lad doing his bit for us all.
Caveat emptor

venividi

Grecco wrote: »

Ah come on, some of his analysis have been piss poor.
Take his latest on Glanbia, he trashed them last year when they were around €3.80, said they were an overvalued Milk based dairy. Failed to see that the milk business was no longer there core product and that they were a major food ingredient and health food supplier. That was last year, this year he spouted the same sh1te but lucky for the rest of us (me included since €3.25 a share) its still on the way up, currently at €10.90 and making a bee-line to €15

As for Donegal Creameries, don't believe a word of it.
As for Wexboy, I believe he`s a from the far side of the big pond not your nice local lad doing his bit for us all.
Caveat emptor

In fairness to wexboy he doesn't seek to hide where he has got it badly wrong. Paddy power is another I seem to recall. Irrespective of his credentials. His articles are interesting. He has been very bullish on fbd which has done very well for me. Ditto aer lingus which has had a very good run. Having said that the iseq has a great run in general over the last while

Fitz123

He's not always right of course not !

At least he tries to analyse companies in a logical manner and bring some attention to Irish stocks, be it a positive or negative write up. Too many threads here are people basically wanting to gamble on shares without proper research themselves. If they were to read a blog like his, it might get them thinking about their own choices a bit more, and whether they are actually a good investment.

He's no Warren Buffet though, so follow him at your own risk etc.

tommylimerick

thanks for putting all that together

Comordha

Donegal Investment Group is ticking up nicely, volume seems to be picking up & plenty of positive insider buying. Anyone know anything? I can see big potential for their potato seed business, especially as food scarcity becomes more problematic around the world & irrigation channels are improving. Kerry Group and Glanbia started off making milk, cheese & butter and now look at them. Could be a good medium - long term hold (5-10yrs).

wired117

There is a dividend coming up soon so ticking up in advance most likely.They are selling off some excess land and hope to have disposed of by year end. It is worth a punt long term for sure, but they need to invest wisely the disposals they do make.

Comordha

Goodbody have initiated coverage with a €6.70 price target.

Sonnenblumen

Comordha wrote: »

Goodbody have initiated coverage with a €6.70 price target.

I wouldn't buy a newspaper from Goodbody.

Did the company not divest assets in recent years? How dependent is the company now on sales to German Retail discounters?

Comordha

Not aware of any sales to German discounters? The Goodbody view validates my own, Donegal now focusing on higher margin selected components of business such as Mushrooms and Potato Seed business and sales growth thus far is impressive. Debt is totally manageable at current levels and being paid down at an impressive rate. I just get the feeling that after many years of being forgotten this one might be coming back onto the screens. Volume has picked up noticably also.

wired117

Good on them.. With over 7% owned by their clients they ought to.. Here is hoping they are right!!

Comordha

Nice rise yesterday on above avg volume.

wired117

Going in right direction could be one to watch.. U reckon hit EUR 6.0 by next mth

Gman1987

Dividend next month

Comordha

Very hard to set target prices with a stock like this, lack of liquidity means it moves in blocks. We'll see after ex dividend what type of investors are investing here.

wired117

Ian Ireland seems to be getting nice share options check their site

MoneyCrowd

From Goodbody
Last trade 4,952 No. at €5.70

From Donegal site
"The interim dividend will be paid on 6 December 2013 to those shareholders on the register on 15 November 2013."

Sonnenblumen

MoneyCrowd wrote: »

From Goodbody
Last trade 4,952 No. at €5.70

From Donegal site
"The interim dividend will be paid on 6 December 2013 to those shareholders on the register on 15 November 2013."

According to Davy site, the ex-divi date is 13 Nov, so last day to qualify for divi will b e12 Nov? Mediocre Yield 2.9%.

There are plenty of Blue chip UK stocks offering yields c 5.0 - 6.0% in similar timeframe. UK SP tax is 0.5% (Irl Tax is 1.0%).

I know where my money will be going next!

Comordha

But do those same blue chip companies offer you the same capital appreciation as this one? Up 79% in 1yr. And how do you know the dividend won't be increased, thereby pushing the yield higher?

Sonnenblumen

Comordha wrote: »

But do those same blue chip companies offer you the same capital appreciation as this one? Up 79% in 1yr. And how do you know the dividend won't be increased, thereby pushing the yield higher?

There are no certainties and I have no crystal ball, so who knows? I would track back more than 12 months history (typically 5 years) before deciding on buying any share. For example, a blue chip like all share prices will also fluctuate but very rarely to the same extent as a low cap player. For example, Donegal Inv has high/low range of € 1.5 - € 5.2, which is very volatile in my books. A weak divi < 3.0% is also another negative.

In contrast a solid blue chip performer with consistent growth on all key metrics will maintain sanity as well good capital appreciation and increasing divi payments. It is surprising how similar future and past performance can be in a well performing share.

Gman1987

No trades today, going to get it hard to breach the 6 euro mark in the next few weeks. The holding date for the dividend payment is 15/11/13. Overall I reckon they should be in a position to post a very successful full year results, There H1 turnover was up 29%, adjusted EPS went from 4.2c to 8.4c. Considering the good summer we had I would think there seed potato business will have a very good crop to sell.

Comordha

Up to €5.86 now, agreed about potato seed, although much of it is produced abroad anyway but by all accounts available this was a very good year for potato growers.

wired117

Next year will be interesting especially if they divest their monaghan stake and realise cash from land sales

Comordha

Indeed & they are the type of company that would release some of those proceeds as special dividends.

lucky john

wired117 wrote: »

Next year will be interesting especially if they divest their monaghan stake and realise cash from land sales

Just interested to know why you think they would sell of the monaghan stake?

To my mind Monaghan themselves would love to buy that stake back but they are very heavily borrowed at the moment so they would have problems rasing the finance. As they are a private company any other potential buyers would need their blessing to work out the real value of the stake. Monaghan have spent millions in the last couple of years. If they thought donegal were interested in divesting their share holding I would have thought they would have prioritised that.

If donegal sell the land bank and the monaghan stake there's not a whole lot left of real value. Is the rise in share price based on a potential cash payout to shareholders or in solid plans to reinvest in a new direction for the company? Either ways I have to say I can't see why the share price is up 70% for the year. Donegal is no Kerry or Glanbia.

lucky john

wired117 wrote: »

Next year will be interesting especially if they divest their monaghan stake and realise cash from land sales

Just interested to know why you think they would sell of the monaghan stake?

To my mind Monaghan themselves would love to buy that stake back but they are very heavily borrowed at the moment so they would have problems rasing the finance. As they are a private company any other potential buyers would need their blessing to work out the real value of the stake. Monaghan have spent millions in the last couple of years. If they thought donegal were interested in divesting their share holding I would have thought they would have prioritised that.

If donegal sell the land bank and the monaghan stake there's not a whole lot left of real value. Is the rise in share price based on a potential cash payout to shareholders or in solid plans to reinvest in a new direction for the company? Either ways I have to say I can't see why the share price is up 70% for the year. Donegal is no Kerry or Glanbia.

Comordha

It's not a Kerry or Glanbia yet, give it some time. Big things have small beginnings.

lucky john

Comordha wrote: »

It's not a Kerry or Glanbia yet, give it some time. Big things have small beginnings.

Donegal are there over 100years, a plc over 20years and ian ireland there 8 years. Can you tell me what the catalyst is now that will turn them into a glanbia?

wired117

Low debt, land bank, profitable Business. The name change could be significant, and may see a transformational transaction. Time will tell if this is a gamble or an investment. They have gotten through the recession and come out the other side.

wired117

Low debt, land bank, profitable Business. The name change could be significant, and may see a transformational transaction. Time will tell if this is a gamble or an investment. They have gotten through the recession and come out the other side.

Gman1987

Good rise in volume and share price today, some big buys, the majority of the orders was filled at 6.50 euro but closed the day with a trade of 780 shares at 6.30 euro. It will be interesting to see where this will head over the next few months.

Comordha

They should release some form of info to the market. The 2-3 releases they make per year are not enough. Investors are obviously enjoying the upward move right now but is there something behind it?

wired117

I have emailed them asking for an update on whether they are planning to update their website and external communication,the lack of them!

Comordha

Looks like Blackrock have been buying - let the games begin

wired117

Well that is very interesting definitely a positive !! Where did you see that info ?send link or additional update thanks

wired117

http://www.ise.ie/app/announcementDetails.aspx?ID=11792465

Ian Ireland exercising options

Comordha

See Irish Farmers Association has reported one of the best potato harvests in a long time & the revenues of their produce division (30-40% of group revenues) were "severely impacted by the exceptionally poor weather experienced in 2012", the read through looks good to me. More seed available to be exported to Emerging Markets & other such regions?

Sonnenblumen

wired117 wrote: »

I have emailed them asking for an update on whether they are planning to update their website and external communication,the lack of them!

What kind of reply did you get?

wired117

They escalated to ian Ireland and following up with IT. Nonsense really that website not reflective of company name and no real updates available. Awaiting timeline will keep you posted.

Sonnenblumen

wired117 wrote: »

They escalated to ian Ireland and following up with IT. Nonsense really that website not reflective of company name and no real updates available. Awaiting timeline will keep you posted.

That would certainly not impress me or remotely encourage me to invest. Methinks Buyer beware?

wired117

Think they are very investable but they don't make it easy.

Comordha

They don't make it easy but there are buyers out there & if you like Mushrooms, Potato Seeds and Yoghurts go for it.

Sonnenblumen

Comordha wrote: »

They don't make it easy but there are buyers out there & if you like Mushrooms, Potato Seeds and Yoghurts go for it.

Look what's happening with basic veg at the moment, farmers are up in arms as the supermarkets compete on 50cent/bag of veg. Own brand Yoghurt fights are also similarly vulnerable. Am I missing something?

Comordha

Their primary business is potato seed which exported around the world, can't see how recent Irish supermarket price competition would affect such business. On the Yoghurt side it could be the case. Go through the 2012 Annual Report & you will find some interesting details on the overall Donegal Investment Group's activities, they include property & shares in One51 for example.

Comordha

http://www.independent.ie/irish-news/mushroom-firm-merger-creates-shareholder-conflict-29954106.html

Read through for Donegal shareholders?

wired117

Very interesting hopefully some movement on this. Again nothing on their website. I have contacted them numerous times. No explanation

lucky john

Comordha wrote: »

http://www.independent.ie/irish-news/mushroom-firm-merger-creates-shareholder-conflict-29954106.html

Read through for Donegal shareholders?

Interesting reading. I believed MMM wanted back full control of the company but I assumed they didn't have the cash to buy out Donegal. Maybe Mr Wilson has just decided to ignore them instead. I hope donegal dotted all the I's and crossed all the t's in 04 and 07 because they are dealing with a wile old fox in Ronnie. The roll of his 2 sons will be interesting as well. They are becoming the face of MM and have an interest in a couple of the major farms. Perhaps even independently of the main group.

One things surprised me in that article. The agreement to sell the joint venture company in 2010. If it was part of the deal in 04 why did donegal not push it through at the time. That had to be a major goal in the deal for Donegal. When the date for disposal came 3 years ago was there a new agreement on disposal? Is that the real reason for this court case. Donegal want out but MM won't play ball. This is one ulster championships game while my money will be on Monaghan.