7:59 cut – RDL

Note

The overriding purpose of the “7:59 cut” series of articles to add value to the debate. If there is nothing that both interests me and which I know enough about then there will be no article. If you see nothing by 8am you can generally assume this is the case. If there has been (or seems likely to be) a detailed write-up on Paul and Graham’s SCVP about a share then I’ll often deliberately write about something else. If I don’t have enough to write a whole article I might post my thoughts on twitter (as I did yesterday) rather a full blog with a pointer.

Today is a bit of a strange one. I don’t have a great insight on RDL, but I have taken the time to write a good question on the SCVP over at Stockopedia. But since Stockopedia is subscription-only I am repeating it here. To avoid cluttering up people’s twitter feed I have not signposted this article.

If you are not a Stockopedia subscriber then you can read any reply from Graham Neary by getting a free trial here: Stockopedia referal link

RDL Realisation

RDL Realisation (LON:RDL) have been drifting for some time before announcing a relatively small writedown. The share price movement perhaps implied this news had leaked and also that it might be the tip of an iceberg (or alternatively, that there is a very small pool of potential buyers).

The company has a split structure with ZDP shares that have the first call on capital. To protect these shareholders there is a buffer in place that I believe is currently preventing further capital returns to ordinary shareholders. In November 2018 the company offered to buy them out for 116p. Today there is an announcement about independent discussions to redeem them between 120.75 and 122p. This is versus their contractual entitlement of 127.63 pence at 31 July 2021. On the face of it an uplift of at least 4% in just 5 months seems good news as it implies continuing or even increasing confidence. Similarly, the remaining return of no more than 5.7% over 15 months doesn’t seem to be outsized, albeit much higher than the 2% rate they were issued with.