Theron De Ris presented his in-depth investment thesis on Dolphin Capital Investors (UK: DCI) at European Investing Summit 2014.

Dolphin Capital Investors: finances and constructs leisure resorts, mainly in Greece, the Dominican Republic and Panama. It partners with top hotel operators (Aman, Ritz, Oberoi) and architects to create high-end luxury properties and then constructs hotel-branded villas to sell to ultra-high- net-worth individuals at a very high margin. The equity is mispriced due to: 1) a lack of confidence that the NAV has troughed and that the value can be realized (NAV still mostly based on land with only one operating asset, and it has been falling for seven years with few recent transactions on which to base the valuation); 2) lack of faith in management’s ability to get financing for advanced projects such as Amankea, Pearl Island and Kilada Hills; and 3) Greek political issues. Having spoken with the independent property valuation agent, De Ris thinks that a conservative approach is being used and that the NAV is a good indication of property value. In the absence of comparable transactions, haircuts are given to raw land with revaluation only occurring once building permits are obtained and construction commenced. Also, Greek land prices have fallen 45% since the crisis. De Ris also derives comfort from the fact that partners such as Colony Capital have lent EUR 40 million against the one operating asset, Amanzoe, and that top shareholders such as Fortress who have backed DCI for many years, keep close tabs on each project. Lastly, DCI has exited a number of assets averaging a 1.7x multiple on cost and often at a premium to NAV. De Ris expects the shares to trade at a more normal 20-30% discount to what will likely be a materially higher NAV over time. An important positive is that there is alignment of interests (managers own 10% of DCI shares and are “true believers” (having paid EUR >90 million to buy 66.5 million DCI shares at 110p in spring of 2008, much of it borrowed against future management fees; they still owe EUR 21 million, having paid annual debt amortization since ’08). Another positive is that Third Point is largest owner with 20%.

About the instructor:

Theron is the founding partner of Eschler Asset Management LLP and portfolio manager for the Eschler Recovery Fund SP. He is responsible for client services at Indus Capital Partners in Europe and was formerly a consultant and senior research analyst in the London office of Indus Capital LLC where he contributed global macro and bottom up investment ideas to the portfolio management team. Theron joined Indus in March 2008 and was previously an executive director and leader of the global strategies team at Morgan Stanley in London for the three years ending February 2008. Prior to joining the global strategies team in 2003, he was responsible for US equity institutional sales to Italy at Morgan Stanley in Milan. From 1995 to 2000, he worked at Goldman Sachs in Frankfurt, London and Milan. Theron, a Chartered Financial Analyst and Chartered Alternative Investment Analyst, graduated magna cum laude from Middlebury College in 1995 with a degree in International Politics & Economics.

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