27th June 2023 DEC announced a share buy back:
The Company intends to conduct the programme concurrent with the following parameters:
• The maximum number of Shares repurchased shall not exceed 97,410,000 Shares
• The total consideration of Shares repurchased under the Programme shall not exceed an aggregate market value of £97.4 million
• The Programme will expire at the earlier date of the 30 June 2024 or the Company's 2024 Annual General Meeting of its Shareholders
I remember people commenting that the pace was too slow. But like Frogs slowly warming on the stove, have DEC holders not realised the pace has increased?
On the 27th November 1.1m shares were bought back. Since June a total of 6,833,054 shares have been bought back (971,309,753 minus 964,476,699 shares), at an estimated 75p a share equals about £5.1m of buy backs. So £92.3m to go or 90,576,946 shares to go. To exceed the former the buy backs would have to be on average above £1.02 so let’s ignore that parameter and focus on the 90.5m shares limit.
Let’s examine what happens if the price “languishes” at 65p for the next 6 months and all 90.5m share buy backs conclude. That’s a further 58,875,014 shares bought back.
Using the Net Assets plus adding back Derivative financial instruments (you can explore the reason why in my earlier article DEC the Halls) gives us an adjusted shareholder equity of $1.29bn ($1,291,202,000)
So if we compare the effect on adjusted NAV:
A 6.6% uplift in net assets per shareholder. (I’m assuming buy backs are funded from the P&L)
But that’s not the whole story. Those pesky shorters, sellers, non believers don’t get to enjoy DEC divis do they? So how much does that save? Over $10m bucks a year.
So what if DEC gave that $10m as increased dividends to its loyal DEC hands? The result is a 7% dividend uplit. That would be a 23.3% yield at 65p. Cowabunga! While net assets are raised by 7p a share (ignoring that of course shareholder equity is also increasing through profits so £1.13 isn’t a forecast or target). Any further shares I buy to average down, are at least 48p below NAV.
Is Rusty “not doing his job” by not “increasing the share price”? (Even if he could somehow). Give me a break.
Rusty keep doin’ what you’re doin’. You’re doin’ a fine job.
(PS do I “want” DEC to remain at 65p? As you can probably tell, I believe 65p is completely mispriced, the fact that the average buy back authorised is at £1.02 tells you that Rusty thinks so too. But they do say clouds have a silver lining. Buy backs at ridiculous prices excite me - and should excite any other DEC hand too - and dismay a DEC shorter.
This is not advice.