1 for 7 fkp now fkpda for some days, page-48

asf,

IMO the article in the Australian (which incidently has been posted before in this forum) reflects both a bit of jawboning by Stockland (given they themselves have on their books Aevum's retirement assets acquired a few years ago presumably at higher than today's prices) and some still overvaluation of FKP retirement assets. However, the market, I believe, is excessively discounting FKP asset valuations.

FKP has already written down its retirement assets by around 25% (from $1325m to $987m) in the last FY report. So currently, these assets in the books make up around $3.06/share, while the remaining assets (net of liabilities) amount to $1.00/share, giving a total of $4.06 net asset backing at present.

But at today's market sp of $1.16, the market is really discounting the company's net assets by $2.90 (ie $4.06-1.16) ie. an equivalent of nearly 95% of the whole retirement assets on the books. Is this reasonable?

I realise there may be some discounting warranted for other assets, still the discount reflected in the sp when considered from net asset backing perspective is way over the top.

However, taking an income perspective may provide some clue asto the current sp weakness. Although in the last FY report the statutory NPAT was shown at around $94m (ie 28c/share), the underlying profit after excluding non-cash valuations was only about $41m (ie 12.5c/share). This latter figure is roughly equal to last year's cash profit, which should be higher this year after the company has improved operational financials and paid out some debt following apartment settlements and non-core asset sales. Based on last year's underlying 'cash' profit the current P/E is only 9.3, and this will only get better due to the factors mentioned above. And any positive revaluations of retirement assets will be a bonus! Further, the direction of interest rates is still favourable (ie downwards), which should help demand for both retirement assets as well other residential developments.

So IMHO, the current sp seems to be significantly under-valuing the company!