I've just had a good read over both the TOT and TGP H1FY25...

I've just had a good read over both the TOT and TGP H1FY25 results from today and wanted to post some thoughts while everything is fresh in my mind. I've always found it's important to read both as they often make comments on TOT in the TGP announcements that aren't in the actual TOT presentation and it tends to give a few clues as to how management are seeing things.

The Key Metrics Are As Follows:

- Gearing at 33.6%

- WALE now 9.4 with a 93.3% occupancy rate

- An NTA of 60c which sits us at a 34% discount to the underlying assets

- Valuations are flat in the past 6 months all though none of these are independent so the real moment of truth will come at the full year results

Commentary is a little more bullish in tone all though as has often been the case with these guys I question how they are going to actually enact their stated strategic goals of growing the fund when gearing is still relatively high and the operating income still isn't quite even covering the dividend (2.6c vs a pay out of 3c) all though we might almost get there when the management fee reduction is factored in plus another round of fixed rental increases in FY26. That vacant floor at Cremorne being leased would well and truly push us over the top. I still can't believe it's sat there fully furnished for 18 months as a real life example of the much written about struggles of the Melbourne office market (covered in the AFR as recently as today where it's always singled out as being the slowest of all our major cities to recover).

They can't risk the gearing ballooning out so soon after a capital raising to fund an acquisition, it makes no sense to do a share swap with another REIT and merge while we trade at a huge discount and it's not like they can do a second capital raising in 2 years so I just don't know what the practical options are here to build scale.

I also truly wish they would stop saying that the fund has no legacy issues when it floated at $1.25 10 years ago and has lost two thirds of it's value in that time plus did the infamous property swap deal in 2022 that was the major contributor to it's financial struggles in the past couple of years and decimated the dividend..... If ever a fund would meet my classification of having legacy issues it would be TOT.

They also used the peer review slide again that popped up at the EGM to highlight that TOT isn't as much of a bargain as it seems to be when compared to the other REITS other than no value being given to the franking credits. The problem with this being our selling point is that I would say we've only got about another 12 months worth? It's a quirk we've been able to take advantage of rather than a long term advantage.

TGP are actually getting pretty aggressive in launching a share buy back at a 10 percent premium to the current SP (they've got just over 100 million in cash!) and have stated they want to heavily grow their funds management business and lift it from 23% of revenue where it currently sits to 80% of revenue. They have commented in both presentations about opportunities emerging in the second half of this year so I think we can safely say some level of corporate activity will happen with TOT in the next year I just don't have full confidence that it will unlock value for the smaller shareholders.