DGX - Diploma Group

[System]

Diploma Group Limited (DGX) is a commercial construction and property development business which offers a complete vertically integrated model by managing the entire design process of a project, from initial concept through to final delivery of the end product. The company has two divisions, Diploma Construction and Diploma Properties which are responsible for carrying out the business activities.

http://www.diploma.com.au

 

[Tyler]

Diploma Group is a property development & construction company & operates predominantly in Perth, WA & the UAE. The company head headed by Dominic & Nick Di Latte having been in management since 1976 (i think).

Diploma listed in 2008 & has seen profits:
08: 8mil 09: 2 mil 10: 10 mil (half year 11): 0 (due to the timing of construction & development projects)

The Company has an order book of 1.1 billion dollars (with it slightly more concentrated on the property development side. From browsing through there developments i really like them http://www.diploma.com.au/Portals/0/docs/ASX/DGX HY11 Presentation.pdf

I bought in at .17 since then mr. market has become depressed with this company and is trading around .12. I might buy more.

Only thing that worries me is the reliance on alot of current assets & liabilities (i.e. 50 mil of account payables).

However there is a property shortage in WA & the DGX service incorporates the inititial design to final delivery.

Tyler

 

[Tyler]

Bought some more.

Up 30% today. Presales are strong

Would not be surprised to see it above .50c after annual report.

Value is at least 30-40c

 

[skc]

This company's balance sheet has the liquidity of quick set cement. The half year report showed that they had negative net cash and living on bank overdraft.

Most of the assets lie in inventory which are essentially completed apartments or those in progress. There are not a lot of information regarding settlements and cash receipts. Browsing one of their development website and one of them comes with 24 month rental guarantee... not so sure that's a bad or good sign.

If they have been converting their inventory to cash then their current share price might be a bargain. At the same time, they are also possibly insolvent. The full year report will move the share price one way or the other imo.

 

[suhm]

retail property development really isn't the place to be atm, if all sales come through then all is good otherwise cashflow will be a serious problem. It also went up 30% because you bought it, or you and one other person. To get rid of the same sort of volume it would go down to 4c at the current market depth.

If the report is bad, there is no way out.

 

[suhm]

Not to sound to negative I have looked at this stock previously due to its NTA, so there is potential there

 

[skc]

Not to sound to negative I have looked at this stock previously due to its NTA, so there is potential there

Same. Typical of stocks with high debt, tiny changes in various assumptions can cause large swings in equity value. Hence the potential upside and downside risk.

Just can't make myself buy it because of the lack of volume and depth like you said.

 

[Tyler]

I dont think the cash deficit is too much of a problem.
Spoke with managment yesterday. Basically they are only using up 50% of available funding facilities (150mil) - they are using 89mil currently & expect to repay 70mil with the expected settlements just coming in now.
Also the property development side usually only starts a project with 70-80% presales
Construction side is stable doesnt use much of the debt like the property development side.

In general the property development space wouldnt be the best in business, the profits & cashflow are lumpy (tho construction is more balanced) but at this price with experienced management, you have a large MOS.

 

[Tyler]

This company's balance sheet has the liquidity of quick set cement. The half year report showed that they had negative net cash and living on bank overdraft.

Most of the assets lie in inventory which are essentially completed apartments or those in progress. There are not a lot of information regarding settlements and cash receipts. Browsing one of their development website and one of them comes with 24 month rental guarantee... not so sure that's a bad or good sign.

If they have been converting their inventory to cash then their current share price might be a bargain. At the same time, they are also possibly insolvent. The full year report will move the share price one way or the other imo.

The inventory is either work in progress or just completed if it was otherwise the company would be in real strife. the ones that have not been sold i think are inventory under non current assets.

 

[skc]

In general the property development space wouldnt be the best in business, the profits & cashflow are lumpy (tho construction is more balanced) but at this price with experienced management, you have a large MOS.

You don't have a large MOS. You do however have a large potential gain if the numbers fall in place.

Good luck and I will watch their full year report with interest.

 

[Tyler]

You don't have a large MOS. You do however have a large potential gain if the numbers fall in place.

Good luck and I will watch their full year report with interest.

Well, even if the report isnt so flash, & they still make a profit the business is worth more than what i paid for it. Also there is a high chance that the presales they keep saying will be realised will be they are quite straight forward.

 

[Tyler]

Reports 24th of Aug. If its good may go up many times (2yrs ago .10-->.50 in a few days)

 

[Tyler]

made a mistake its septermber 9.

 

[Tyler]

JUst won the 2nd stage of the Queens riverside project worth $107,000,000 brining the total value of contracts won in fy12 to $188,000,000. Hopefully margins decent since the mkt cap is around $15,000,000

 

[Tyler]

Hopefully the catalyst is the Eleven78 project that is 95% presold

 

[imperator]

New home sales showing encouraging signs. Other housing market data incl prices indicating we are jumping around the bottom, recent interest rate cuts + the realistic expectation of more, the current rental "crisis" in WA, the continued population inflow into WA and the broad expectations of a pick up of such... - amongst other things - all these factors should be strong tail winds for this company, particularly at the current price... I am perplexed that there is such little interest in the stock.

Is there something I am missing?

Sure, it's balance sheet could be better, but that should improve notably as at 30 June with the successful launch of eleven78, which, as has been noted in this thread was 95% pre sold, and as noted in the annual report, is expected to contribute 5 mil in profits in the second half. Recent announcements also show some positive signs in moving to an independent board - which will hopefully see a reduction in related party deals, whilst their construction division has done OK at winning contracts... All of the above seems to me to be positive... I just don't get it.

Definitely one to watch in my view Tyler, and I would be interested to hear others thoughts as to why this company is so unloved at present...

Please note; the author of this post has a stock holding in this company and his views may be unknowingly influenced by that holding. You should never purchase anything based on someone else's opinion. "Beleive nothing... No matter who says it..."

 

[Paavfc]

Looks like DGX is starting to revieve...interesting times !!!