Capital Trap, page-35

I owe you more than one then Cocky, I hope you can write it off...
I know you have to earn it first though, so if there is ever anything I could help
you with down here in Melbourne...just shout out

I was $6k out of pocket in legal fees when I ran the Oz minerals shareholder action
group website that in the end did help keep Oz minerals alive and with an extra
USD $240mil more that what China's Minmetals were trying to get it for, and I didnt
have a huge position on OZ at the time, I just couldnt let it go ahead without doing
my bit to try and stop it.


'buying the Victorian farm is the direct opposite of a sound financial management.'

Yep, I agree with that, it also seems to be not in shareholders best interest, that is unless
they really see something special in it, and are going to raise capital at a price well
in excess of the current shareprice (when we raise capital to pay for it), and if we
do raise then all shareholders should get a chance to participate equally


'the banks will make the final decision in a higher interest rate environment.'

The current debt is getting out of hand, we have had operational losses
every year since listing and only made a million or so the year that we did
make a profit and if you go back to the IPO document it lists how the properties
performed in the years prior to listing and by the looks of that we also made
more operational losses than profits, hence my question a little whilst ago about
what is wrong with our lands, this was in a falling and cheap interest rate enviroment
What we are seeing now with rates has the potential to pop the farmland price
bubble, if you cant make money at 3% interest how can you make money at 6% plus

DBF's properties that we had at listing not 5 years ago have gone up nearly 100%
in valuation, yet our Shareprice is not much more now than when it listed at $1.50
So we are just relying on capital growth, but the lack of operational profits has
eroded the fundamentals of the company and has led a lack of confidence in
investors to want to buy into DBF, thus causing the large discount to NTA that
we are now stuck with, this is also part of the very low liquidity in the stock

So where to from here

DBF is 70% owned by HSBC and BNP nominees, who is behind these entities?

It looks like Richard Magides owns nearly 24%
DWS investments 16%
Ed and his wife I think owned over 10%
There was a Singapore super fund that owned fair chunk
and original shareholders of the two funds Wir and Mil that were then
vended into DBF on IPO (which owned the farms)

look at least that is my take on roughly who owns what, it is probably
not correct or current, but 70% plus of DBF is locked up by these 2 nominee
companies and this is only getting bigger and with the buyback it is really
draining the pool of available shares on offer, hence very low liquidity

So are these holders as disillusioned with the performance of DBF as the
market appears to be when looking at the discount to NTA and liquidity

Is there any interest in liquidating the company, surely the $40Mil is a pretty
big incentive for this, Duxton have another 5years of management rights left,
if things dont turn around in that time will there be a rebellion..I would hope so

Is there a reason that DBF is the only listed broadacre farming venture,
why are they usually unlisted funds or trusts or the like, is it because of the lack
of operational profits in farming and the reliance of farm appreciation for profit,
look, I am guessing that is the case, are farmers just property speculators who
like riding around on tractors...just joking Cocky but it seems a bit that way

Why did I buy into DBF
Well I admit that buying a dollars worth of farmland for 65c was a big factor

I also like the fact that farmland is a tangible asset in a world of intagibles

I think that grain prices are going to stay stronger for longer

I like the fact that DBF's properties are quite fertile, this was confirmed by harvesting
over 60,000 tons of grains the season after the drought broke, so given the right
conditions our farms can produce bumper harvests, the issue is this only appears
to happen once or twice a decade, we need goldilocks conditions to produce enough
grains that are going earn enough to produce an operational profit.
So why keep trying to grow grains and cotton that in all probability will lose you money
more times than not, surely farming should have better odds than this?

Increasing Wyangala's capacity even by 20% would move the odds in our favour a fair bit
but that is out of our hands, as would maybe looking at other uses for our farms, increasing
livestock percentages, maybe going back to more lucerne or the potential of other perenials
that might save us on the high cost of fertalisers which will probably remain dearer for longer
with the war in Ukraine and world gas prices, what I am saying is things are changing fast
input costs have soared and are staying up there, we cant rely on the goldilocks years to
get us through anymore

I dont think you will get the chance to grab any at 80c, that is unless farmland prices drop
substantially, which I wouldnt rule out entirely, but would not happen when the AUD is as low as it is

I dont hate the management fees as much as you, .85% annually is not really that much, and they
do have to do things for that .85%, the performance fees are another thing, they could have
left the farms barron and stil earnt performance fees of over $2mil last year, too bad they dont have
to hand the fees back if/when property prices fall

I am hoping for a few of those goldilocks years in the not to distant future

cheers
grant