Data Group Developments

There have been some interesting developments in the situation at Data Group (DGI) since I last wrote about them just 10 days ago!

Data Group Dilutes Shareholders...Again

Shareholders of Data Group should not be surprised that they are getting poor treatment from the company's insiders, because this is consistent with the company's recent behaviour. Just a few months ago, the company essentially bankrupted its equity holders by converting debt to equity, rather than shore up the company's capital situation with a rights offering that CEO Michael Sifton originally agreed to backstop and then backed out of.

Data Group is Really Cheap

Data Group provides print marketing (e.g. direct mail) and other document management services for businesses, with six locations across Canada.

Data Group Debentures

Two years ago, I discussed the debentures of Data Group as a potential value play. It has not turned out well so far.

Data Group's Debt Doesn't Reflect Improved Performance

A year and a half ago, I wrote about Data Group's debentures as a potential value opportunity. At that time, they traded for 58 cents on the dollar with maturity in less than four years, for a yield to maturity of 20%. Today, those same debentures trade at 71 cents; but as maturity is now just over 2 years away, the yield to maturity is even higher, closer to 25%! This is despite the fact that business conditions for the company have improved markedly. Read more...

Data Group Debentures Trade At Massive Discount

Shares of Data Group (DGPIF.PK) have a dividend yield of nearly 20%. In this low-rate environment, Mr. Market is making it clear he does not believe in the sustainability of this dividend. While Data Group has proven itself to be a cash cow, because of the company's debt load, Mr. Market may be right.

But investors don't have to take the downside risk associated with the company's equity, because the company's debt (DGI.DB.A) is trading at a massive discount to par. Data Group's debentures trade at just 58 cents on the dollar (as of Tuesday's close), providing an upside of over 100% should the company make good on these obligations due in 2017.Read more...