Interesting perspectives on the NTA to share price. I actually view this stock as truly quite exceptional value at current price (but could be very wrong, ofcource!).
My rationale: FY19 was a total disaster of a year. This was a combination of very poor prior management cost control/integration & also just terrible luck re timing their acquisitions immediately before a cyclical downturn in Cairns.
The way I see it, the cyclical downturn in Cairns could get worse in the short term, but it wont last forever - the natural landmarks are just too unique & there will always be interest e.g. in the Great Barrier Reef. And cost control/integration really can't get any worse (given it was already so terrible!). And yet, despite having just about the worst possible year, these net assets/share of $0.238 delivered a Free Cashflow Yield of ~ 4.5% (which actually included growth capex, so very likely understates the yield, but I'll use 4.5% for conservatism).
So if these underutilised & poorly managed assets produced a 4.5% FCF under last year's conditions, it seems to me that even just a sound (doesn't need to be great) review of operations/integration and capital divestment has the potential to vastly improve returns - given the quality of their underlying assets assets. Conversely, I really struggle to see how financial performance could be
that much worse than last year (notwithstanding short-term cyclicality/weather outside of managements control, which should hopefully also start to be managed with some improvement in operating leverage under sound management) - so I view potential return profile as being highly asymmetric to the upside.
Re another major write-down, I would actually view this as quite improbable. The very simple DCF models used by auditors basically took FY19 results & assumed this was how the FNQ assets would be utilised into perpetuity (ie they would never reach their potential - FY19 being a proxy for terrible performance, not normal performance).
The auditors state in the accounts that they basically had no choice but to extrapolate FY19 results, despite their awareness of the strategic review - but as this was not yet formalised as at the date of the audit, naturally they had no choice but to do the calculations based on the FY19 actuals (what auditor in their right mind would do anything different). See screenshot below.
Accordingly, I would strongly suspect that say if a PE bidder were to value these assets, using sound operating assumptions and normalising for cyclicality, I would strongly suspect the value would be some multiple higher than the remaining book value.
