Hey mate, l share your frustration. A poor deal for AVN shareholders? Yeah. Where's the $3.82 we were promised? It was a lie. We were only ever going to get 2.2 x whatever HDN was valued at plus the 28.5¢. If HDN dropped to 10¢ per share, a unit in AVN would be worth 22¢.
However, HDN only listed in November 2020. I believe it was an unlisted entity and part of HMC before that. If you compare its performance on a graph to other REITs and the All Ordinaries (XAO) it's not too bad. The underperformance came when the merger/takeover was announced in October.
It's part of my concern...who the hell are these people?! I wouldn't mind if we were joining with Scentre, Charter Hall, GPT, Vicinity, etc. The parent company, HMC is also newly listed and has already spun-off another REIT -- focusing on healthcare. The takeover/merger looks to be an empire-building exercise for HMC. HDN will be an externally-managed entity. A contributor wrote an excellent article on Live..wire (one word) about this issue. I don't like the move away from the large format retail -- which we've been told for two years is more competitive and cheaper for retailers than shopping malls. Now, here we are with a combined entity focused on 50% "daily needs" and shopping malls. I am a fool to not have sold at $3.70. I already have general retail mall exposure through GPT. A lesson learned. Hopefully.
However, HDN will have half its assets as the old AVN, and with AVN management. Brokers have 7 Buy, 3 Hold and 1 Sell recommendation on HDN through the Market Index website.
CQE (Charter Hall's childcare and social infrastructure REIT) was up 4% yesterday for no reason whatsoever. With these REITs, to over-simplify, if debt and the WALE is okay, you're really only paying for the NTA (I never pay more than a REIT's NTA per unit) and the dividend yield. In my mind, anything less than 0.9 NTA to price is great. Anything more than 1.1 is not great. Yield needs to be at least 5%. I hold CQE but won't be adding to it. I'd like to hold RFF, but it fails both of these requirements! It's a bit like Woodside Petroleum or Santos. Sure, company-specific factors are important but it's all about the oil price!
What I'm getting at is it's hard to stuff up NTA per unit and yield in an environment where property values are rising. The dividend yield is a reflection of the unit price, which is a reflection of sentiment. CQE had a great day yesterday. It looks fully priced. HDN (AVN) will have a good week or great month -- probably once this half-pregnant situation is resolved. There's nothing fundamentally wrong with either REIT. Scentre and Vicinity have been doing really well in the past couple of weeks after a bad January. SCG was up 14.5% in the 3 weeks to yesterday. We are due for a strong run on this stock. I'm sure we will get it soon, and March 30th's dividend as well.
Within a period of a few days, at some point after the merger, we will be up ten percent for no reason whatsoever, and I'll be sitting here, with at the equivalent of AVN $3.60+ thinking, "I'd be crazy to sell now with it up 10% so far this week". Famous last words ! I suspect tomorrow's meeting will show HDN and the combined entity is worth more per unit than the current share price. And that the combined entity yield will be 5.5 to at least six percent. Put it this way, we're not going to be any worse off with this deal short-to-medium term (although I doubt we are going to be better off).
I hope you can attend the online meeting tomorrow and get some more information first hand about the new entity.
Good luck mate
AVN Price at posting:
$3.25 Sentiment: Hold Disclosure: Held
