Dorel Industries Ord Shs Class A T.DII.A

Debt Liquidation Implications

[nozzpack]

For the first three quarters, Dorel paid $30 million US in Finance charges.
That will be about $40 million US for 2021.

With debt extinguished, that $40 million US = $50 million in C$ will become added to operating earnings to the tune of about  $1.60 per share in C$.

That is a significant savings and with cost compression ongoing, and supply chain problems receding ...manufacturing already brought back home..the two remaining division are going to be very attractive to buyers on a debt free basis..

[jmkOttawa]

Nice analysis, thank you. There is still substantial value to be unlocked at the current trading price.

[nozzpack]

Yes, quite so. The stock has a short position which through wash trading they are now limiting the upside while they scramble to cover...else they have to pay the dividend..

[jmkOttawa]

I would not wish to be holding a short position on Dorel at this time.

[Paddy902]

Yes, even a conservative estimate would suggest we have another 2-3 dollar upside...ie a 11-12 dollar stock once the $15+ Canadian dividend is paid...basically 10% in a month. I bought some back right at the close for $24.

[decko70]

i dont think all debt will be paid off.  The PR said debt will be reduced ( not eliminated) 

[nozzpack]

I think you might be right. They will have $345 Million US of cash from the sale of Sports, following the dividend payment and I recall they had $60 million in cash heading into Q4 . So, perhaps less than $100 million in debt remaining . Regardless, today's confirmed sale of Sport is valued at about $915 million cad or about $29 per share . The shorts kept us below $24, so we are still $5

[decko70]

Nozzback - fully agree re valuation - WHat Short Interest do you see ? ALso note some of the 345 will be spent agreesively buying back shares  This is really good as it will also save them paying the 12/15 $ divi per share - I note they will start buy back this week - and remember ex divi date is 18 Jan - again this is all really positive as they clearly believe its undervalued