everyway I look at the balance sheet of this company I fail to see how it goes into receivership. True the earnings are terrible but it is still covering cashflow albeit just. It has say $550m of debt, $400m secured to ANZ. If it becomes the banks call I still fail to see how its in their interest to send it to receivership. I see the numbers as follows;
The recent Great Southern Land Transaction which would seem to be of a similar size to GNS land holding (but much poorer quality given the tree yields they are getting)went for about $415m on an encumbered basis (approx $600m unemcumbered) which I would think puts a floor under the GNS land of about $500-600m. On top of this GNS has tree ownership which they value at over $300m but lets say we take 30% off that still gets us $200m. So in a worst case scenario based on recent transactions multiples the forestry estate of GNS is worth $700-800m which is well in excess of debt. On top of this one can add about $200m for the receivables book. True if all of these MIS punters defaulted then it mightnt be worth $200m but given the relative maturity of the book it should easily be worth $100m in tree value. Then there is the sawmill business which might be worth say $150m, very roughly......so we are getting close to $1bn in base case valuation pretty easily, versus debt of $550m.
I am trying to see where this analysis is wrong but for now my best guesstimate is that there is value in GNS and hence it should survive in some form. If they are forced to pay back the debt then my best guess would be they would sell 50% of the plantation business for $350-400m and be debt free (after MIS receivables book taken off debt)..
I am open to other suggestions as to valuation, please bring them forward....
GNS Price at posting:
53.5¢ Sentiment: None Disclosure: Held
