Agree. its the derivatives issue that is the problem.
Occupancy levels in the US are strong. its non-discetionary focus will help cushion any further softening in the US economy. That's not the issue.
As CER confirmed to me: "With the Australian dollar currently trading in the mid 60s, the net investment hedges are significantly out of the money, comprising approximately 80% of the Trust's MTM liability of $873m. The equity hedge contracts are priced in the approximately range of $0.80 to $0.90. "
According to page 33 of the presentation:
"Agreed to close out existing principal components of equity
hedges when the MTM values of the hedges are zero.
– Equity hedges are long dated (4.5 year average maturity)
– Due and payable at expiry of contracts if MTM is out of the money"
Does anyone seriously think the AUD will not appreciate between now and 2013?
I dont think theres much to worry about.
If the exchange rate does get back to 80-90 in that time, we can write back a significant portion of the NTA that we've lost in the last 6 months with no effect on cash.
CER Price at posting:
4.0¢ Sentiment: Buy Disclosure: Held