agm & thoughts, page-7

Thanks for the shares Kasper! I was the 50,000 at 0.34 that you sold down to. I agree that it looked like an automated stop loss was triggered and there was just no depth there to soak it up. It isn't a nice feeling watching the shares that you just paid 0.34 for going to 0.305 in a couple of seconds!

I've been accumulating this one for a little while now and believe that is one of the most undervalued REITs on the market. The valuations of the hotels are formulated by using a discounted cash flow model and I am sure that the assumptions in the June 2009 valuations were much more pessimistic than has turned out to be the case.

One of the things that I love about the hotel investments is that you can get a pretty good feel as to how the hotels are performing via the use of sites like www.wotif.com.au. The comparison information is all there on rates and occupancy in the THG year end PowerPoint presentation.

From my observations there still seems to be some very good deals on offer at the hotels (eg. the $199 with 2 drinks and parking at the Hilton), but these seem to be snapped up pretty quickly and it has been fairly common of late to see the hotels completely sold out. These rates also aren't too far from the average rates that were being achieved last year and the majority of the rooms are at higher rates and occupancy seems to be strong.

It was very reassuring to see in the AGM presentation that $55m of development inventory has been sold since 30/6 and when you look in the detail you see that much of the stock actually sold above NTA. The talk in the AGM presentation also gave me the feeling that management are hopeful of selling the Novotel Northbeach at an amount above NTA. The combination of the prudent selldown and stabilised hotel values means that THG are likely to be feeling very comfortable with their LVR covenants.

Just a couple of other observations. I stayed at the Novotel in Melbourne a few weeks ago and the construction of the 56 additional rooms seems to be coming along quite nicely. I think that this should be a good earner for them as it is quite a simple construction right on top of Australia on Collins (THG owned). 56 more rooms in the best located hotel in Melbourne and no land cost, can't hurt the valuation when completed!

I also had the pleasure of having a look around the THG residential development at Palm Cove (about 20min North of Cairns). The development is in a beautiful location and while I'm sure that sales are slower than management had first hoped before the GFC, the area seems to be growing well and over the next 12 to 24 months it should be a good money spinner for THG.

The current discount to NTA with no threat of dilution and locked away finance are the things that investment dreams are made of. The guys running this Trust have extensive experience in the property industry and have done an exceptional job of steering THG through the GFC. I also am confident that in the medium term the significant value will be unlocked, most likely through share buy-backs which management have used on previous occasions. The other possibility if THG does not stop trading at such a ridiculous discount to NTA is a takeover. Likely suitors would include Singaporean fund on the prowl for underpriced assets or even a cash/share offer from Amalgamated Holdings could be an outside chance.