Duke Royalty investment, Avast and Sylvania Platinum

Duke Royalty follow-on investment and……

nice to see Simon Thompson write up Sylvania Platinum in today’s Investors Chronicle and rate it a Strong Buy. The Investors Chronicle also includes Avast as a Tip of the Week; something I obviously agree with!

Duke Royalty (DUKE.L, Market Cap £105m, 43.5p, 5.2% of JIC Portfolio and 8.7% of JIC Top 10)

Conclusion: A small follow-on investment but nevertheless good news. With each new investment, I think the quality of Duke Royalty as a business, improves. It improves due to increased diversification. On current forecasts the shares are on a prospective March 2020 dividend yield of 7.0%, rising to 8.3% in the year ending March 2021. As it invests the £17.5m raised last week, there is scope for the dividend pay-out to be increased. I have it as Medium Risk/High Return, suggesting for me a 5.0% weighting. I think High Return is appropriate as, if by March 2021, the share price appreciated to a price that left it on a 6.0% dividend yield, that would require a 40% increase in the share price. On top of that, one would have received around 12% of the current share price in dividends. A re-rating of the stock to put it on a 6.0% dividend yield does not seem outlandish to me. I increased the position to 5.0% last week. Happy Holder!

Duke has made a £2m follow-on contribution to Lynx Equity, one of its existing royalty partners. Lynx is allocating the £2m towards the acquisition of Danish specialised, steel staircase manufacturer, Sundby Trapper.

Duke’s total investment in Lynx increases to £12m and starting this month it will be entitled to higher distributions of £1.6m per annum from Lynx. Duke says that this follow-on investment increases the security of its investment in Lynx.

Neil Johnson, CEO of Duke Royalty, said:
“We are delighted to deliver further portfolio diversification and income through the rapid deployment of proceeds raised from our recent fundraise. Lynx UK has a strong track record of financial performance which has facilitated two consecutive positive annual adjustments and, when consolidating its five wholly-owned businesses, represents one of our largest Royalty Partners by revenue and EBITDA.
“This contribution further highlights our track-record of being a flexible and long-term funding partner for businesses in the UK, Europe and abroad.”

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