back to fundamentals

Guys,

Let's stop predictions and come back to the basics:

VPG has well regarded management and sound corporte governance. Per its 30 June 2008 annual report presentation, it has:

1. NTA of 95c/share,
2. NAV of 1.3$/share,
3. sound balance sheet structure with low gearing of 33%, and look-through gearing of 39% as at 30/6/2008.
LVR of 50% vs covenanted level of 60%

(These numbers are based on 95% asset revaluation at June 08 and before recent sales.)
4. Healthy debt maturity profile with little due in 2009 and
mostly short-term asset backed revolver lines.
(page 17)
5. steady interest cover of 2.7x (vs. covenanted min of 2.0x or lower).
6. financial covenants are well in compliance
7. 51:49% EBITDA (FY2008) split between Europe and Asia Pacific (mainly Australia), with no US exposure (correct me if I am wrong)
(page 7)
8. FY2008 EBITDA of AUD301mln vs forecast FY2008 per PDS of AUD266mln. Negative NPAT of AUD248mln vs forecast of AUD141.5mln was due to non-cash goodwill impairment charges as per A-IFRS. Otherwise, it would have been better than the PDS. Cash earnings would still be very good.
(page 11).

Refer Annual report presentation below:

http://www.asx.com.au/asxpdf/20080826/pdf/31bwy3s62y939q.pdf

Page 4 and page 15: Financial Position Summary as listed above.

The recent asset sale outcome is better than expected under the current environment indicating that situation is not as bad as what analysts expected. Hence, despite the below book value sale proceeds achieved, the market reacted with higher sp (surely from a massively oversold position).

With its market capitalisation and good assets portfolio, VPG remains an attractive acquisition target under the current environment of likely consolidation in the property sector.

Management is also actively pursuing capital management initiatives with asset sale at appropriate prices anticipated.

In short, it is still a company with sound business profile, reasonably conservative capital structure (esp compared to other REITs), and still good earnings profile (though hard to quantify as an outsider).

The only downside is probably lower or no dividend, and earnings downgrade. That said, the fundamentals of the business remain sound.

Can anyone shed some light on more detailed analysis of the earnings forecasts for FY2009 or any comments from latest broker's report?

Thanks, L