cnp and cer confusion, page-4

Hi octain,

There is no harm in asking basic questions like this, however you need to know this basic stuff about a company BEFORE buying it. Break the 'buy first, ask questions later' habit now before you lose your shirt.

CNP and CER are two separate companies with two completely different business models, risk profiles, and investor profiles (CER investors are going to be more conservative, CNP are more high risk/high return)

Basically, CER is essentially a property trust which either co-invests (with CNP) in or owns fully the shopping centres directly. CER then pays CNP fees to manage the assets that CER owns.

CNP owns or co-owns many shopping centres itself (through a very complicated structure). However the 'cream' or reason for owning CNP is the lucrative management fees that it earns from running shopping centres for itself, CER, and a whole heap of wholesale and retail investors.

The main reason that you cannot value CNP based on just 51% of CER market cap is because CNP has huge off-setting liabilities. One such potential liability is the $1.7b loan guarantee it gave to US banks in relation to it's shaky US assets. As you can see, a potential $1.7b guarantee pales in comparison to the suggested 'missing' market cap of $200-odd million. There are a host of other reasons for the current valuation.

This is one negative, but there are also many positives associated with CNP (which are discussed all through the posts on this forum), which are why I hold the stock. However the above might indicate the sort of nasty surprises you could be in for if you purchase without doing your research.