Questor: this trust has lost 20pc – but we’re still betting on double-digit gains

If we promise a “quick, low-risk way to make a double-digit return”, as we did in February last year when we tipped Dunedin Enterprise, readers are unlikely to be too happy with a double-digit fall – of 20pc in fact – instead.

Despite this depressing lack of progress we will stick with the trust. In fact, we still hope for some very healthy returns.

We’ll also look at the action that shareholders need to take in response to a recent offer from the trust to buy back some of their shares.

The crux of the case we made for the fund was that it was in the process of winding itself up and that in time investors would get back the true value of its assets, which we judged to be much higher than the share price at the time. Although coronavirus has since arrived and upset many assumptions about the valuation of assets, the argument broadly holds.

We originally hoped that as much as 500p a share could be returned to shareholders when all the holdings were liquidated. Following a conversation with Nick Greenwood, manager of the Miton Global Opportunities trust, who put us on to Dunedin, we will now trim our aspirations to 400p-450p – still very much better than the current share price of 292p.

Since our earlier tip investors have received back 25p a share as their entitlement to proceeds of the sale of holdings, on top of 7p in dividends. The trust now wants to return more proceeds of its disposals to shareholders and is doing so via a “tender” offer.

This means that investors have the option to offer some or all of their shares to the trust, which will buy them back at close to the portfolio’s net asset value. It will use the NAV figure from the end of September, which it will publish on Nov 2, so we don’t yet know what shareholders who take part will get for each share.

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There is a good chance that the NAV figure used will be higher than the most recent one of 379.8p, not least because it emerged this week that one of the fund’s holdings, Global Processing Services, had secured investment from Visa, the credit card giant.

Private investors who want to take part will need to contact their broker for the appropriate form or online equivalent. The deadline is Nov 6.

You will be entitled to sell back a certain proportion of your shares (the exact figure will also be announced on Nov 2) and can offer to sell back more, although this will be allowed only to the extent that other investors do not take up their entitlement.

If you don’t take part you will still get all the proceeds of the trust’s liquidation due to you; you will simply get them later and will probably get a different – very possibly higher – amount for each share.

Mr Greenwood said he intended to offer some of his trust’s shares for sale back to Dunedin. Our advice is to hold on to any shares you do not sell back.

Questor says: hold

Ticker: DNE

Share price at close: 292p

Update: Doric Nimrod Air Three

This trust owns four Airbus A380s that it leases to the Emirates airline. It continues to receive the lease payments due, it continues to pay its shareholders the quarterly dividend it has always paid and it continues to yield more than 20pc.

These three things are fundamentally incompatible and something has to give. The market, judging by the yield, expects Emirates to stop making its repayments and Doric Nimrod to suspend or cut its divi.

The trust has just published an informative update. It said: “The board notes the continuing market commentary regarding rental deferrals and confirms that it has received no formal request from Emirates to renegotiate their leases and that they are currently servicing them in line with their obligations.”

It added that, according to reports at the end of August, the airline had received a $2bn cash injection from the Emirate of Dubai.

“The capital increase was not publicly announced, but disclosed in a prospectus for a potential bond issuance by the government of Dubai,” Doric Nimrod said. It pointed out that Emirates bonds were trading at par value and at yields that did “not appear to indicate any significant financial stress to the issuer”.

We still believe that the trust’s own income and the dividends it pays are secure.

Questor says: hold

Ticker: DNA3

Share price at close: 40p

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