Regarding the receivables facility: regardless of how the finance is setup, the company still needs this amount of working capital to operate. If they were to collect on receivables then pay down this debt, working capital would still need to come from somewhere to continue purchasing new inventory and paying staff. Yes, in a liquidation situation its likely debts would be paid off, but there's no value in the current price if that's your base case ($250m MC, ~$35m Net assets).
This leads on to @johnmcgee 's point. The DRP is a means of paying down loans whilst extracting the franking credits. I prefer it, as my investment structure allows me to benefit from distribution of FC's. If the shares were held in my name, the overall benefit would not be as significant.
Again, on what was said in the last post, it seems that DD is finding ways to consistently grow, both profitably and by efficiently utilising capital. The purchase of ED, moving into distribution of cabling, the purchasing a larger property when required (and available) and continually picking up new distribution agreements show the quality of management. All of this without a huge increase in the number of shares (except the ED purchase of course).
On succession planning - he's only in his early 60s, he has no reason to quit/retire.
Finally, I believe Quingees said: "Also, does the extent of the illiquidity make the prospect of significant SP growth unrealistic"
I think if you look into this, you'll find there is a correlation between illiquid stocks and higher returns - hence making SP growth more realistic. This makes sense to me, as more liquidity essentially means:
- a potentially larger pool of people buying/selling, leading to a more efficient market
- larger volume, which is usually associated with more free float/larger company. This means fund managers can take meaningful positions in liquid companies
I do remember reading a paper from Tweedy Browne on the subject, but I'm unable to find it through my quick Google search. I'll search again later today - if I find it, I'll let you know.
DDR Price at posting:
$1.57 Sentiment: Buy Disclosure: Held
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