Anyway, the big instos like CBA etc all own shares in CNP. I can't see them just letting it collapse, as they will all lose too much money.
That's a bit like saying there was no way all the financial geniuses in Wall Street would let property price collapse simply because they would lose too much from the subprime defaults. CBA is tiny compares to the Wall Street giants, and yet, they all make mistakes (BIG ones!). Didn't the golden boutique fund (PPT) own a boatload of CDR before they hit their problem? and ran like a mad dog when there was clearly a long term implication? Before you think the big boys will bail this out, better think if they are still in the stock.
Fundamentally, I don't think the issue is with the net equity in the company (which is around 4bn if you discount for firesale price and apply some insolvency risk into the equation). The real issue to me is what will the company become if they have to strip out all their key performing assets? It will be a totally different company altogether. It's like WES with and without Bunnings. Also, if they are forced to liquidate some assets, the sale price could be worse than expected. This is especially so for their US exposure. How many property funds or investors in the US aren't already burnt by the current subprime crisis? Throw in the high cost of funding against a backdrop of stagflation and weakening retail sales, there may not be a buyer who'd be willing to pay even 80% of the current allocated value.
The net equity, and consequently LVR, looks ok as long as they don't become a forced seller in a terrible market. Their short term funding issue is only for 1.3bn, but they do have another 2bn or so maturing end of next year. So it now brings in your preception of the money market in 12 months' time. Many expert had forecasted this credit crunch to have gone away by now, but it lingers on.
One thing that will obviously help is the credit auction held by the Feds overnight. That should help ease some of the tightness in the money market, though it'll still remain tight.
Too much uncertainty for my liking despite the perceived value in the stock. Good luck to all holders though.
618
CNP Price at posting:
0.0¢ Sentiment: None Disclosure: Held
