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DP Eurasia (DPEU)

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CommissarJones
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DP Eurasia (DPEU)

#159178

Postby CommissarJones » August 13th, 2018, 11:23 am

Is anyone out there feeling brave? DPEU* has plunged 27% since the close of Thursday's session and is down 41% so far in August.

Of course, there's a good reason for that: DPEU gets three-quarters of its sales from Turkey, which seems to be slipping into a full-blown currency and debt crisis. And most of the remainder of DPEU's sales come from Russia, which is on the receiving end of US sanctions. The interims are due on 11 September and will cover the six months through June, but I would certainly expect some kind of comment on current trading, which should be interesting.

*DPEU is the exclusive master franchisee for Domino's Pizza in Turkey, Russia, Azerbaijan and Georgia.

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Re: DP Eurasia (DPEU)

#159212

Postby simoan » August 13th, 2018, 12:58 pm

CommissarJones wrote:Is anyone out there feeling brave? DPEU* has plunged 27% since the close of Thursday's session and is down 41% so far in August.

Of course, there's a good reason for that: DPEU gets three-quarters of its sales from Turkey, which seems to be slipping into a full-blown currency and debt crisis. And most of the remainder of DPEU's sales come from Russia, which is on the receiving end of US sanctions. The interims are due on 11 September and will cover the six months through June, but I would certainly expect some kind of comment on current trading, which should be interesting.

*DPEU is the exclusive master franchisee for Domino's Pizza in Turkey, Russia, Azerbaijan and Georgia.


Why bother? This is gambling, not investing. Who knows what the future holds for the Turkish Lira? There are so many good companies operating in countries which are politically stable and where the rule of law (just about!) protects your investments, why get interested in this or even waste brain space thinking about it?

This isn't the first post I've seen with regard to investing in the situation in Turkey but that was possibly even more stupid because it involved buying an ETF - so based on the presumption that the assets underlying the ETF are liquid and so the ETF itself is a liquid investment. If the Turkish stock market crashes the liquidity will dry up and so will the possibility of selling the ETF. Why are people so attracted to these situations? It's just a punt.

Sorry, not intended as a rant, just a rap across the knuckles! :-)

Si

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Re: DP Eurasia (DPEU)

#159223

Postby YeeWo » August 13th, 2018, 1:42 pm

simian wrote:This isn't the first post I've seen with regard to investing in the situation in Turkey but that was possibly even more stupid because it involved buying an ETF - so based on the presumption that the assets underlying the ETF are liquid and so the ETF itself is a liquid investment. If the Turkish stock market crashes the liquidity will dry up and so will the possibility of selling the ETF. Why are people so attracted to these situations? It's just a punt. Sorry, not intended as a rant, just a rap across the knuckles! :-) Si

A rational % of ones portfolio "punted" on a Special Situation can prove highly profitable. The profits can then be recycled into something LTBH. The parallels between Indonesia 1998 and Turkey 2018 are very close indeed, Turkey's geographical position though is so critical I can see this being resolved expeditiously. I can't see, once this is resolved, the Turkish Stock Exchange being perpetually illiquid (LON:HTRY) or the Turkish People stopping eating Pizza (LON:DPEU). As of this morning 2% of my portfolio is in HTRY, if it recovers it'll be wonderful if Turkey collapses entirely, which I doubt, I'll of lost 2% of my portfolio.

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Re: DP Eurasia (DPEU)

#159238

Postby simoan » August 13th, 2018, 2:32 pm

YeeWo wrote:A rational % of ones portfolio "punted" on a Special Situation can prove highly profitable. The profits can then be recycled into something LTBH.

It can also lead to very large or 100% losses. There's nothing rational about punting money on these kind of situations but people that do it will always try to rationalise it.

YeeWo wrote:The parallels between Indonesia 1998 and Turkey 2018 are very close indeed, Turkey's geographical position though is so critical I can see this being resolved expeditiously. I can't see, once this is resolved, the Turkish Stock Exchange being perpetually illiquid (LON:HTRY) or the Turkish People stopping eating Pizza (LON:DPEU). As of this morning 2% of my portfolio is in HTRY, if it recovers it'll be wonderful if Turkey collapses entirely, which I doubt, I'll of lost 2% of my portfolio.

Well, good luck is all I can say. I guess everyone's risk tolerance is different but 2% is still a lot of money in my portfolio and there's no way I'd want to lose it. It seems you understand the dangers with the liquidity underlying the ETF, but I don't think comparing past events in other countries should be used as a reason for investing, or expecting a similar outcome. With regard to DPEU, it's not even as though the trading update in July was particularly good and now you've got a currency crisis on top. It's also a highly indebted company and I assume the debt is denominated in Turkish Lira because if it were in USD the share price would surely have decreased a lot more.

All the best, Si

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Re: DP Eurasia (DPEU)

#159279

Postby YeeWo » August 13th, 2018, 3:56 pm

simoan wrote:There's nothing rational about punting money on these kind of situations but people that do it will always try to rationalise it.

Not attempting to rationalise it. The position is a very small percentage of a large reasonably well diversified portfolio: -

Code: Select all

Co.  | SP     |    % | XIRR 
AZN  | £60.58 | 2.4% | 35.19%
BP   |  £5.59 | 5.9% | 16.82%
BATS | £41.44 | 6.8% | -6.54%
BLND |  £6.36 | 3.6% |  8.57%
CCH  | £26.41 | 2.0% | 14.33%
DGE  | £27.95 | 4.6% | 11.87%
FEET | £12.96 | 2.1% | -1.31%
G4S  |  £2.50 | 4.0% | 28.42%
GSK  | £15.51 | 4.3% | -0.44%
HTRY |  £1.41 | 2.0% |  3.98%
HSBA |  £7.18 | 4.7% |  9.81%
IMB  | £29.38 | 7.2% | -6.61%
INCH |  £7.02 | 4.6% | 12.66%
IHG  | £47.26 | 3.9% | 11.72%
JLT  | £14.38 | 3.8% | 30.19%
RB   | £67.88 | 4.4% |  0.40%
REL  | £16.89 | 4.1% | 20.59%
RR   | £10.38 | 3.0% |  9.77%
RDSB | £25.66 | 7.4% | 33.96%
SN   | £13.62 | 4.5% | 10.13%
ULVR | £43.73 | 5.4% | 12.82%
VOD  |  £1.81 | 9.4% | -3.25%

simoan wrote:Well, good luck is all I can say. I guess everyone's risk tolerance is different but 2% is still a lot of money in my portfolio
2% of my portfolio would have an impact at the Dacia dealer and perhaps take a few months for me to earn, but I can wear the situation either way.
simoan wrote:regard to DPEU, it's not even as though the trading update in July was particularly good and now you've got a currency crisis on top. It's also a highly indebted company and I assume the debt is denominated in Turkish Lira because if it were in USD the share price would surely have decreased a lot more.
I'd be very wary of Single Company risk also in an EM crisis situation. Turkey does have some non-bank well run companies though, from the Sabanci stable for example.
simoan wrote:All the best, Si
And to you, nice to have a non-ill tempered disagreement!!

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Re: DP Eurasia (DPEU)

#159289

Postby simoan » August 13th, 2018, 4:21 pm

YeeWo wrote:I'd be very wary of Single Company risk also in an EM crisis situation. Turkey does have some non-bank well run companies though, from the Sabanci stable for example.

The main point I'm trying to make is that there is no compulsion to invest in a politically unstable country at all - why bother? It doesn't matter how good a company is, or how good its corporate governance, if it is operating in an uncertain business environment caused by an erratic government. Obviously, it's painful to watch your holding in HRTY decrease, and you should never forget you need a 50% gain to make up for a 33% loss. Even if this crisis subsides it is highly likely the Turkish stock market will not return to its previous level because many outside investors will exit and not return.

All the best, Si

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Re: DP Eurasia (DPEU)

#159519

Postby gbjbaanb » August 14th, 2018, 1:35 pm

simoan wrote:
CommissarJones wrote:Is anyone out there feeling brave? DPEU* has plunged 27% since the close of Thursday's session and is down 41% so far in August.

Of course, there's a good reason for that: DPEU gets three-quarters of its sales from Turkey, which seems to be slipping into a full-blown currency and debt crisis. And most of the remainder of DPEU's sales come from Russia, which is on the receiving end of US sanctions. The interims are due on 11 September and will cover the six months through June, but I would certainly expect some kind of comment on current trading, which should be interesting.

*DPEU is the exclusive master franchisee for Domino's Pizza in Turkey, Russia, Azerbaijan and Georgia.


Why bother? This is gambling, not investing. Who knows what the future holds for the Turkish Lira? There are so many good companies operating in countries which are politically stable and where the rule of law (just about!) protects your investments, why get interested in this or even waste brain space thinking about it?

This isn't the first post I've seen with regard to investing in the situation in Turkey but that was possibly even more stupid because it involved buying an ETF - so based on the presumption that the assets underlying the ETF are liquid and so the ETF itself is a liquid investment. If the Turkish stock market crashes the liquidity will dry up and so will the possibility of selling the ETF. Why are people so attracted to these situations? It's just a punt.

Sorry, not intended as a rant, just a rap across the knuckles! :-)

Si


Because only a few months ago Turkey was seen as a stable country in the middle east that was still being considered for some sort of entry to the EU. Its not like you were investing in Iraq or Syria.

As for DPEU, I hear its a well run company that makes money, just that the money it makes is now worthless because of the geopolitical circumstances is unfortunate. Is it gambling, to expect Turkey to back down in its willy-waving with Trump? Or is all investing gambling by this definition?

I mean, you might invest in European companies, and next week, find that Italy has crashed out of the euro, nobody would think investing in a European ETF was gambling or a super-risky investment.

So the question is - will Turkey rejoin the global economy, and thus the Lira will recover, and thus DPEU will rocket up. I think the answer is "yes", the only difficult bit is knowing when that'll happen. Probably next week - if they release that pastor for some made-up reason, then the Lira will shoot back up. There is a chance Turkey will join the list of failed states though, and then all bets are off.

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Re: DP Eurasia (DPEU)

#159526

Postby YeeWo » August 14th, 2018, 1:51 pm

gbjbaanb wrote:I mean, you might invest in European companies, and next week, find that Italy has crashed out of the euro.
Quite ironic that the conversation moves on to the EU/EUR. Having bought LON:HTRY 13 Aug @ £1.37872 I woke this morning to find Mr Market was willing to offer me £1.485 for it +7.7% overnight. :idea: Not being one to look a Gift Horse in the mouth, I sold. The proceeds were then reinvested (not wildly speculated this time?!) in Vodafone. Vodafone is now far-and-away my largest holding 11.4% of portfolio. GLA

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Re: DP Eurasia (DPEU)

#159838

Postby ADrunkenMarcus » August 15th, 2018, 1:25 pm

It's down dramatically from almost 250p to 93p over the last year!

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Re: DP Eurasia (DPEU)

#159862

Postby gbjbaanb » August 15th, 2018, 3:30 pm

Aye - but a week or so ago it was £1.60, and my VOD shares were bought at £2.16... now £1.76 - so even the "best" companies with stability and safety can plummet, even without a currency crisis to help it along.

Interestingly, Turkish economy is mentioned in an AJBell note yesterday:
https://www.youinvest.co.uk/articles/in ... nd-painful

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Re: DP Eurasia (DPEU)

#159907

Postby ADrunkenMarcus » August 15th, 2018, 5:48 pm

At some point of cheapness it gets interesting. I like the business model and hold DOM and DPP.

Best wishes

Mark.

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Re: DP Eurasia (DPEU)

#159910

Postby simoan » August 15th, 2018, 6:01 pm

gbjbaanb wrote:Aye - but a week or so ago it was £1.60, and my VOD shares were bought at £2.16... now £1.76 - so even the "best" companies with stability and safety can plummet, even without a currency crisis to help it along.

Maybe this is because Vodafone has a reasonable sized business in Turkey with revenues of roughly EUR 500 million per quarter. So the fall in VOD is very likely related to the decline in the Turkish Lira since these revenues will have decreased. You don't need to invest in local companies to gain exposure to these events and it's important to know which companies in your portfolio have exposure to various countries around the world.

All the best, Si

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Re: DP Eurasia (DPEU)

#160613

Postby ADrunkenMarcus » August 19th, 2018, 4:37 pm

DPEU's share price declined further. One to watch!

Best wishes

Mark.

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Re: DP Eurasia (DPEU)

#315282

Postby westmoreland9 » June 4th, 2020, 6:23 pm

shares are just over 33p now, mightily tempted.

the company is valued at less than £70k per store, compared with £1500k for domino's uk, and £280k for DP Poland.

the turkish segment is stable and generates significant free cash flow (problem is that is in turkish lira that has been devalued over the past few years). the russian business is struggling a bit.

thinking of selling my domino's uk shares and buying this. after all, DPG shares have actually increased since covid, yet these are down 40% +.

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Re: DP Eurasia (DPEU)

#315295

Postby ADrunkenMarcus » June 4th, 2020, 7:14 pm

westmoreland9 wrote:shares are just over 33p now, mightily tempted.

the company is valued at less than £70k per store, compared with £1500k for domino's uk, and £280k for DP Poland.

the turkish segment is stable and generates significant free cash flow (problem is that is in turkish lira that has been devalued over the past few years). the russian business is struggling a bit.

thinking of selling my domino's uk shares and buying this. after all, DPG shares have actually increased since covid, yet these are down 40% +.


FWIW, DPEU seems to be on a 8.4% free cash flow yield on a current basis and the forecasts on Sharepad show a 24% free cash flow yield on 2022 figures (who knows how close those guesses will be to the 2022 outturn!)

Best wishes

Mark.


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