URFPA: Now a speculative buy, page-33

Hi Noomxx,

Firstly, I honestly appreciate the intelligent responses which is not usual and nice to see!

A few things which have stopped me:

1. Your analysis does not take into account tax. The distributions are not franked, so your true post tax distribution return is $11 and therefore cost base for URF is 16.5c/share.
2. USD appreciation risk is real and unless you have the ability to hedge, is something that I'd be worried about destroying your returns.
3. I do no trust the book value of their properties & suspect they have been selling properties that can achieve book value & those that can't are not being offered. When they did their ridiculously expensive refurbishments, they capitalised the value of those, so the book values are way over what market prices are. Their valuation panel has largely been the same "third tier" local valuers for the last 5 years, this in itself is suspect.
4. Most importantly, I modelled that even post conversion of CPU's, deleveraging to 40% debt because of the $20m of G&A fees that they have said they're aiming for per year, the vehicle will still be JUST breakeven and thats when I've modelled them only paying 2.0% interest on their debt.

So whilst it may appear attractive, even if everything goes to plan with the turnaround which is risky in itself, you will still be left with as a shareholder in a vehicle that is breakeven......

If you want to see my working on this, please let me know & i'll email it.