On a fundamental level relative to CNP, CER looks better off. If you have looked through the CER data, you'll know that the extent to which CER can be affected by Super LLC issues is 'ringfenced'. This means that should Super LLC fall over (which is unlikely) it will have a maximum impact of 67c per share NTA. We are pricing the litigation impact, should it be successful, at $200m or 9c per share in 2-3 years time. Remember that last half all CER US assets (yes, all) and 50% of Aus assets were revalued and this amounted to a $58m loss. The total loss for the half, including the revals, was $261m or just under 12c per share.
So, for a very basic calculation on a worst case scenario take the current NTA of $1.65 subtract another loss this half equivalent to last (12c - which is probably a lot more than it will actually be), 67c for Super LLC (again, unlikely) and another 9c for litigation in 2-3 years time and you are still left with 77c. We, (along with Credit Suisse and JP Morgan analysts) agree that this is a sufficient margin of safety above the current SP for a value investor with the right appetite. The underlying business of CER is also running well and is a lot less complex than CNP. As I have said before, a divvy from CER is a real possibility at some point. Distributable income for the half was 6.69c.
When the CER result was announced in Feb, the SP went nuts but it was subsequently dragged down, in part by general Centrophobia. If you listened to the half year webcast (which I highly recommend you do), you'll hear even the analysts agree that CER is in reasonable shape. Not brilliant, but OK.
We now hold about 35% more CER than CNP; not because we have sold any CNP, just because we have spent time buying up CER when the opportunity presents. Hopefully, you can see why.
CER Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
