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Charter Hall Long WALE REIT IPO Latest info and Price Discussion, page-2

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Katavi

741 Posts.

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02/10/16

17:14

Post #: 19567781
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Originally posted by Nani (MG) ↑

Sorry Gentlemen for starting a new Thread . I spent the past 24 hours and gathered some info and certain facts that I was not aware of for discussion and see whether this is priced well or reasonable or too high etc. Lot of us had changed our minds and are not sure. In this thread let's focus on Facts and figures rather than general ramp up or ramp down matters. let's nail this whether it will be a winner or a flat open or a Dud Cheers.

Gentleman, I spent the past 24 hours through my best contacts to gather what's happening with Long WALE at the management level and High End Institutional Level and what we are reading in the media here either through Murdoch's Australian or Fairfax's AFR and SMH etc is true etc. I could say this is the best effort I ever made as Katavi said it was spinning my head too. I was going to go into this IPO in a big way before the PDF was released. Then after PDF is released, I pulled out. Then after seeing media reports and people connected to Corporate of UBS and JPM, their feedback to me, I have decided to go in again in a big way. but I was not happy. So I spent quality 24 hours solidly on this and at last managed to get through to the Top Management that are doing Roadshow currently and also to few Top Instos going into this. I repeat I didn't speak directly with them but my contact spoke to them directly late last night and this morning. So you could say what I will be writing below is still 2nd Hand Info.

This is what I was told, that changed a lot to chew for me.

1. You know how they were supposed to raise $1.1206Bil, guess how much they are really raising.$250 Mil is Firm by Parent Charter Hall. That leaves $870.6 Mil. Apparently of this amount The Parent's one of the Unlisted Funds Called Charter Hall Direct Investment Fund No 1 Valued at $260 mil ( Pls don't ask me what it is, as I don't have a Clue ) has moved all its assets in to the float and decided to take a very high Majority of money as Firm Shares in the IPO. Also another few of the parents Funds who moved their assets into the IPO will also collect Some cash and Some Shares you could say 30% shares and 70% Cash with these other funds. I was told that this combined figure total for the amount of shares that are going to be taken by the Main DIF No 1 and the Other funds add up to around $250 Mil to $300 Mil.That leaves an amount of around $600 Mil left to raise.

2. As you know the legal obligations etc, I can't name names now. Apparently someone who pulled out a substantial amount of money in the last 10 days out of CHC has agreed to put in around $70 mil through his various companies into the IPO. That leaves about $$530 Mil or so left to raise.

3. The management wants to give most of the shares to Retail and starve the Instos apparently.One of the reasons why VIVA was so successful apart from having a Long WALE is , they gave very small allocations to both Instos and Retail. But these Long WALE guys want to do differently. My source couldn't get the breakdowns.

4. Apparently Ale's Gearing is 45% and Viva's Gearing is 35% and this IPO's gearing is 11%. If you were to raise the gearing of Long WALE to 35% the supposed Yield rate would go close to 6.5% and apparently $2.45 Viva's yield is around 5.1% or so.

5. If the NTA Premiums were to be considered for Ale it is around 655 or so and for Viva it is 20% and for this IPO it is 3.4%

6. So if there is say $2 bil in demand that is 3.8 times Over Subscribed as only $530 mil is to be raised. The word is Instos demand itself is in excess of $2 Bil. I was not given any retail figures. But I was told that brokers were told to close asap rather than waiting for days, so that they can reward their loyal clients with bigger allocations. That's what might have happened. Even small Instos were not allowed to bid through Retail Brokers, I was informed.

7. Apparently the Parent has lined up very long time tenanted quality properties from their own stable that they have recently acquired, to be placed in to this after listing for a total of up to $350 mil. I was informed that with those properties the WALE would go higher than 12.5 years and the yield would shot up. I was told the NTA is $3.88

My source was told that apart from 1 Fund manager who said, " pricing is very tight not much left on the Table for someone to get in on Day 1 " no other fund manager raised the issue of price. My source was told that Fund Managers have piled into the CHC Stock and bid up its share price (until the gentleman took $500 mil off due to the rise in SP because of what instos did to get access to this IPO) in the last few weeks in expectation of allocations in this REIT IPO. Apparently Instos are lining up and that's true. No Q about that. Analysts and market observers supposedly expect this to be very heavily oversubscribed. Also apparently this is the largest ever REIT Raising on ASX!

Based on this latest info, I have decided to keep my large bet intact and see what happens. Please remember this is my personal decision. No One should invest based on someone else's research or opinions, as we all know. Our usual guru's here would you kindly look at this info and dissect and crosscut it to to see whether this IPO would be worthwhile if Gearing was to be raised fairly quickly by another $350 mil acquisitions and also if the NTA was to raise to say 15% or so how does it compare to Ale and VIVA. Cheers. I open the discussion for you. Kindly express your views freely. I was proven wrong like many in Kogan and REV but proven right many more times as well. No one is perfect I believe, we all make mistakes in our assessment like I did. But the most important thing is all of us to express every possible fact nd figure based on reality not Hype or Gloom. I open this for discussion Gents. Cheers

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Hey Nani,
Thanks for all this information.
Comments:
1. My calculations show that at $2.40 VIVA's yield is 5.4% and at $4 , WALES yield is also 5.4%.
2. I geared WALE up by $400m or about 35% gearing to reach a yield of 6.4%. This compares almost exactly with your source at $350m extra gearing with a yield of close to 6.5 % .
So, I refine my views on my previous post :
Would be nice if WALES yield was slightly higher than VIVA at $4 to give some downside protection. Based on your demand summary above then price of $4 will possibly hold due to demand . ( Still always nervous about perceived demand . However, if you compare WALE with Bunnings and ALE as per the UBS report then at $4 WALE is cheap. I do not think that market will just compare WALE with VIVA. Comparing with Bunnings and ALE also appropriate. )
The upside potential if it is geared up compares with your sources so I stick with my value of about $4 to $4.70.
CONCLUSION
Based on above reasoning and your summary then downside probably more protected ?
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