Well, historically Centro actually did quite well. In fact it was one of the top performing LPTs in Australia. If you look through some of the previous results announcements and webcasts, even up until mid last year it was a great company.
In the third quarter last year, Centro looked like it was going to have reasonably healthy earnings and distributions (dividends). I think the meltdown on December 17th took numerous people by surprise, especially the instos. If you listen to the August webcasts, everything seemed to be rosy and probably was.
Where things started to go slightly pear shaped was the acquisition of New Plan Excel last year. I recommend listening to the announcement webcast of this (which is available through boardroom radio) to get a feel for the magnitude of what they undertook. It came close on the heels of two other US acquisitions as well.
There were a number of questions raised at the time about whether the acquisitions were good for the company and the share price started to decline.
The New Plan purchase was funded part equity / part debt. When the crunch came late in 2007, Centro could not refinance the debt and the rest we all know. Compounding the problem now is the overall credit crisis, falling asset valuations and peripheral problems like not being able to secure hedging arrangements, investor confidence, brand damage, reputational damage... and so the list goes on.
It was probably the magnitude and speed at which events happened that shocked everyone. Since then, and coupled with media doom and gloom, Centro has become an outcast.
The question now is whether the core of the company is still sound. The lenders are showing support and there is a very, very slow acknowledgement from the investment community that the company has long term potential. This is emerging faster in CER than CNP. The problem is that we are still playing chase-the-deadline, which leaves a "will it / won't it survive" shadow over absolutely everything. Once this is out of the way, we should see the company returning to health, albeit in a very different form.
CNP Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
