Certainly some sort of chance zero is the end result. A few things worth mentioning I think.
I thought after the revals and when the hedge was taken off the NTA was approx 38c. Currency moves since might bring that to 42c. I can't be definate on this so maybe your figures are more accurate. As you say it does become a bit like a call option over the factors you mentioned. The positive being that it seems to have much more time on its side than RAT & REU. If we believe the company (a big assumption there) they should be able to meet their obligations for perhaps over a year. Potentially that gives a lot of time for some sort of improvement in YENAUD, credit markets and Japanese real estate. The assumption seems to be that the properties are all worth at least 10% less than where they were marked at just a few weeks ago and that RJT MUST sell at those levels NOW. Yet right now they have not breached any debt covenants. What if in a years time property recovers 10% from the latest valuation and the JPYAUD appreciates 10%. This would have NTA going from 42c to 70c? A lot of companies would like to sell real estate now but obviously not at such depressed prices, and so far the banks seem very reluctant to force sales. So you buy RJT at 6c, their properties fall by 10% and all equity is wiped out, but if prices rise by 10% the NTA goes up to 70c (more than 10 times current share price..). As a shareholder, if properties fall by more than 10% you do not suffer from the extra risk ( you only lose the 6 cents) , but if properties recover more than 10% you get ALL the upside (70c plus). It is definately like a call option, but seems to be cheap versus REU and RAT because you are buying more time for a potential recovery?
RJT Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
