allco may defer results again, page-37

Source Westpac Premium Research, Aspect Huntley
Dated 05/02/2008
intrinsic Value @ $9.65


Event:
First closing of Global Transport and Infrastructure Fund (Allco GTI) postponed.

Impact:
* The first closing of Allco TGI has been postponed after extensive and open consultation with the foundation investor and their reluctance to proceed at this time.

* AFG announced on December 31, 2007 it had received a commitment of $200m from a large Australian institution allowing the first close ahead of schedule in January and a final close was expected to occur later in 2008

* This is obviously a setback as the launch of the fund would have allowed the transfer of seed assets from the AFG balance sheet to the fund which would have reduced debt levels, re-cycled AFG equity and in all probability created a profit for AFG.

* The decision to postpone “should not have a material impact on Allco’s earnings for this financial year.” The underlying assets that would have been sold to the fund “continue to perform robustly and are underpinned by strong demand from the operators of those assets”.

* Seed assets identified for Allco TGI “included a share in five European wind farms, direct investments in three aircraft, and a share in a portfolio of 27 ships.”

The market has, correctly or incorrectly, been sapped of almost all of its energy for AFG. Emotional selling coupled with concerted short selling has driven the price down to levels that do not reflect the performance of the underlying business if persistent management comments have credence. This selling has been the correct action to have taken but flies in the face of stated fundamental performance.

Consensus FY08 EPS forecast currently sits around 72 cents with a range between 58 to 70 cents. At the current share price - $2.90 - AFG is selling at five times the bottom end of the rage of 58 cents. The market continues to be overwhelmed by negative sentiment and announcements like today do not help the cause.

We maintain our Hold recommendation.