Dolphin Capital Investors Q3 Update, Fund Raising

The recent €50m equity issue is a game changer, as it helps finance Dolphin Capital Investors’ (DCI) short-term business plan, should enable it to progress developments and improves potential to generate revenues from partnership deals and villa sales. Its plans for the initial phases of four advanced residential and leisure schemes attracted a new investor which contributed €30m of equity, as well as strong demand; four times oversubscription for available shares from existing shareholders. Sensitivities, other than construction risk, remain exposure to the Greek economy and international demand for luxury villas and leisure, although Aristo just reported its best quarter since 2007. New money will help secure two years of development, reduce potential for further NAV dilution, help unlock the value of early projects and provide breathing space to negotiate with JV investors. Adjusted for new shares and cash, Q3 NAV/share, net of deferred tax was 81p (101c), well above the current share price.

Strong Endorsement From New And Existing Investors
The commitment by new and existing investors is an endorsement of the business plan. At the core is completion of the first phases of four schemes under way in Greece, Cyprus, Panama and the Dominican Republic. If DCI can deliver these to budget and schedule, and hit sales targets revised for the current market, revenues should generate cash to finance subsequent phases of these developments.

Modest Visibility, But Financed For Two Years Of Development
DCI’s revenues are unpredictable, as they relate to sales of high-end apartments and villas, investment by partners and exits from existing schemes. However, the new equity provides valuable certainty regarding finance for its first four developments, which target distinct country markets and high-end buyers of luxury second homes.

Valuation: Share Rebound Reflects Lower-Risk Outlook
The c 60% share price improvement since the equity issue was announced reflects improved potential to deliver short-term development plans and achieve sales to second-home buyers, JV partners and other exits. However, the shares are still 68% below adjusted NAV/share, a substantial discount for risks associated with country (especially Greece) weighting and luxury second home markets. New funds reduce the risk of further dilutive issues and DCI will progress other projects through zoning, permitting, design and branding to bring them to advanced status and improve potential for cash returns. The strategy aims to bring DCI to cash flow positive status and enable it to return capital to shareholders via share buy-backs and dividends.

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