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king of car yards a ruthless trader

  1. Billy Gatess

    5,609 Posts.

    King of car yards a ruthless trader
    March 17 2003

    With a big share and even bigger property portfolio, Rick Damelian talks to Brian Robins of going public.

    He speaks for 10 per cent of Strathfield Group and is keen to double his stake. Ditto for Auto Group, the car auctioneer, where he has 14 per cent and wants 20 per cent.

    Ricardo ('Rick') Damelian may be best known for his run of car yards at Taverners Hill, along Parramatta Road, and may have missed the mark with two of his major stockmarket deals - but he has made millions on the way through.

    One was a lunge for control of Queensland car group AP Eagers a few years back. When it failed he sold most of his stake to Nick Politis, the owner of City Ford.

    The other left Damelian an underbidder for the car yard business of Henry Walker Eltin, Trinity Motors, where he had 5 per cent.

    For one of Sydney's biggest dealers, selling 5000 new and used cars a year, Rick Damelian is not an unhappy loser, especially if there is a profit in it.



    "We are managers and builders of businesses and wealth, from property holdings to shareholdings," he says.

    Damelian is an emigre from Uruguay who came to Australia in 1970 via the US, where he had been studying. The threat of being drafted at the time of the Vietnam War saw him consider moving to Canada, before opting for the gentler climes of Australia - where he ended up being conscripted anyway.

    He learnt the tricks of the car trade at Suttons Motors, Chullora, working there for three years in the mid-1970s before launching his own car yard. He started out at Taverners Hill, selling used cars and up-market European marques, before buying the Ken Matthews car yard at Haberfield, which he has built up to the point where he controls most of the Parramatta Road frontage at Taverners Hill with a car business turning over $300 million a year, gross assets of $150 million under management, with debt never more than half of that figure.

    Allied with the car business, his biggest play is property, with a portfolio worth a little over $70 million, again centred on Parramatta Road.

    He has a 200 metre property on the Leichhardt side of this major artery and 140m on the Petersham side, with other properties extending all the way down to Five Dock. He claims it is one of the largest property holdings within five to six kilometres of the CBD.

    Sated with property in that part of Sydney, Damelian has been turning to the sharemarket, where he has a portfolio valued at well over $30 million, up from around $20 million at the start of the decade.

    Last year alone, his share trading totalled $100 million, a handy boost to Stuart Foster, the head of private client broker Fosters Stockbroking, which handles Damelian's business.

    Damelian has toyed with taking his business public several times, although never proceeded. In late 1993 he first began the process of going public but baulked in 1994. Twice subsequently, in 1997 and 1999, he reviewed the plans.

    The attraction, he says, was to use scrip to buy other car groups. But as the car makers increasingly prefer to deal with individual owners rather than public companies, most car yards have disappeared from the stock exchange lists.

    "We went almost to 11th hour," he says, aborting the listing because the secondary market was a bit fragile.

    Damelian Automobile is structured as an unlisted public company, "so don't be surprised if in six months you hear that probably we have listed," he says.

    The last time Damelian toyed with doing something in the public company sphere was in 1999, when he sought to raise $15 million for a "virtual" car yard - a plan which went nowhere as the tech boom tanked.

    Damelian says his share portfolio has two components: strategic plays such as Strathfield, Auto Group, Adtrans, Quiktrak and, until late last year, AP Eagers, and a trading section.

    Damelian bought out Rodney Adler's FAI stake in Eagers at the time of the FAI-HIH merger but the prospect of a struggle with Politis for control saw Damelian opt out.

    "I put it quickly to my board and it took only a five minute deliberation," Damelian says.

    Auto Group has struggled after overpaying for some acquisitions but is slowly getting on top of its mistakes.

    Strathfield Group is his latest play. He has 6 per cent of the shares and a quarter of the recently issued convertible notes, which would convert to another 4 per cent of expanded capital.

    Given the fact that it is a neighbour and much of the gear Strathfield sells is used in the auto sector - car radios, CD players, security systems and the like - Damelian has long had a watching brief on Strathfield, although it was only recently that he saw value, especially with the recent changes to senior management. These changes have seen Andrew Kelly, Strathfield's founder, pull back from the day to day running of the company.

    Damelian has been sounded out about a board seat at Strathfield.

    "Our expertise in retail is outstanding. Also our influence in many business circles. For companies like Strathfield, it can be invaluable at times," Damelian says.

    What is fair value for Strathfield shares?

    "Thirty five cents, at the moment. Ask me in six months, and I'll say 50c, perhaps. Remember, the asset backing is around 50c per share. After a number of writebacks and things like that, it may be 45c.

    "But it is still very good value at these levels, very good value."

    On Friday, Strathfield cleared the decks, announcing three one-off write-downs totalling $15.2 million.

    These left it with a net loss of $18.2 million for the six months to December 29, compared to a net profit of $1.2 million for the same period last year.

    The announcement came after the market closed but the shares improved 0.5c to 26c.

    Damelian's other "strategic" holdings are 3.5 per cent of Adtrans - the Adelaide car seller which is also one of the biggest truck dealers in NSW - worth around $2.5 million, plus a large holding of Village Roadshow preference shares, where the key attraction seems to be the dividend stream.

    As for trading, Damelian has been in and out of Ten ("We had a lot of shares in Channel 10 and we made very good money from $1.80, to $2.20 where we sold") and Telstra ("We also made a lot of money out of Telstra the past 12 months, in and out a couple of times, we had serious holdings").

    Damelian reckons Telstra is a screaming buy, given the lift in the interim dividend, and is looking at getting back in.

    Henry Walker also remains on the radar, after making big profits trading this stock in recent years. The original attraction, Trinity Motors, has been sold, but contracting appeals. "We believe HWE is one of those companies that has a magnificent future, and great potential, and is one of the cheapest stocks in the market."

    As for losses, there have been a few, although like most sharemarket investors he is reluctant to talk about them.

    When probed, he cites Pasminco (lost $140,000) and ERG ($300,000), where he is still an investor.

    "We are ruthless if a company is not performing very well, unless it's a long-standing strategic investment in the company," he says. Share trading losses are well below the market average, he asserts.

    Is now the time to be buying in the sharemarket?

    Damelian says he thinks it is "an exceptional time" to buy.

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