Ann: Partial Share Sale - David Dicker, page-19

It's true that the share sale has impacted the SP but this impact will be (relatively) short lived. Mid to long term the SP will be governed by company performance.

I'm pleased with how the business has performed recently. For FY23, revenue growth was only 5% as the wind down in PC sales continued. They made strides to streamline the business and improved the cost base evidenced by a return to 3.8% PBT margins in Q3 and Q4 of FY23. This margin is almost the highest it's ever been barring the year impacted by lockdowns. The most impressive part is these margins were achieved with much higher interest rates than previous years. If the interest cost was the same as, say FY20, the PBT margin would be sitting near 4.1%.

From listening to the results conference calls, my understanding is that the margin of high 3s is here to stay. My conservative estimate for revenue growth is 5% for the full year. Q1 and Q2 revenue growth will be the weakest but as we head towards the end of the year PC sales are likely to pick up which will mean PC sales (~20% of revenue) contribute to total revenue growth rather than weight down revenue growth.

If we assume PBT margins of 3.8% for the full year and a tame top line growth of 5%, EPS will reach over 50c for this year - representing another ~10% increase in EPS over the previous year. FY25 will likely have an even greater bottom line growth rate because revenue increase from PC buying will be in full gear by then and the margins will further improve from cost efficiencies and the very likely interest rate declines in FY25.

For some reason, the market is not pricing this as a structural growth company. Based on past performance and current commentary, there is a very good chance DDR will continue to achieve bottom line growth averaging in the high single digits (as a minimum) for the foreseeable future. To grow at these numbers while continuing to pay a 100% dividend, the company deserves a higher PE ratio than ~21.

Provided that DDR can improve EPS by ~10% this year, I think it's just a matter of time before the SP starts going up and making new all time highs.
No issue with David selling shares as it doesn't affect company performance. If he decides he's had enough and up and leaves, that could have a tangible impact on company performance. I know that he doesn't really involve himself much in the day to day but he seems to run a tight ship with high expectations of his senior management (based on stories he's shared in interviews like the one where he fired someone who said 'x' margins were not achievable and hired Vlad who said he can do it).

So provided David doesn't have a screw the world moment where he ups and sells everything and leaves the company, I'm very comfortable with staying invested in DDR. Even if the SP doesn't appreciate in the short term, I'm more than happy to sit patiently and have my shares increase by over 1% every quarter and 1.5% for the final quarter. Barring David leaving the company, it's hard to see this go meaningfully lower than where it is currently.