I think you need to rethink your property developer calculations.
Not only is there $70m in writedowns but they have lost $15m for this six month period taking the balance at the end of the year to $85m. That will reduce NTA to about $1.45 a share.
The other thing to keep in consideration is that the NTA of a property developer doesn't equal the market value of its assets (it can be significantly more or less depending on where you are at in the property cycle).
For Devine it is likely to be significantly less. For the 2014 calendar year they expect to earn a pre-tax profit of only $7m-$10m on an NTA base of around $230m. That's hardly an adequate return on equity.
That implies they are still carrying a huge number of zero or low margin projects on their books (developments where the market value will be way less than their stated accounting value).
Basically, the $70m in writedowns relate to assets they intend to sell now. If they were to writedown their remaining assets to market value rather than carry through at lower of cost or NRV then there would likely be significantly higher impairments.
The market value NTA could be less than $1 a share. Another big indicator that market value is still less than accounting NTA is that the banks are insisting on guarantees for the debt (or they would require a capital raising). If the real NTA was still $230m or so the banks wouldn't be so flustered.
This was a disaster of an announcement considering most other developers are increasing profits now. I'm actually surprised the price didn't drop further.
I've previously been a holder but was lucky enough to sell out recently. Always intended to hold some but had a sell order in a few weeks ago that got hit. Was looking to re-enter around the $1.10-$1.20 mark but after this announcement would probably have to go below $0.70 before even considering.
DVN Price at posting:
95.0¢ Sentiment: None Disclosure: Not Held
