Your NTA of $1.05 is probably over a year old. If property price...

Your NTA of $1.05 is probably over a year old. If property price declined 50% since then, and gearing was 50% for simplicity then NTA reduced 100%.


From the Intelligent Investor
Goodman Group is in urgent need of life-saving surgery, but founder and chief executive Greg Goodman appears unwilling to admit the patient.


Goodman Group has announced a $466m half-year loss, down from a $285m profit, following $474m of (downward) property revaluations and a $161m writedown on its 11% stake in ING Industrial Fund. Operating profit fell 26% to $216m and a 9.65 cent distribution was declared (ex date 23 Dec), down from 17 cents, which is almost half the current security price. Management reiterated full-year earnings per security guidance of 19.3 cents.


But the profit result is a sideshow to Goodman’s obsolete financial structure. Gearing is way too high and lenders will be pressing for asset sales or another security issue. Goodman raised $956m at 90 cents per security in October, which helped sink net tangible assets per security to $1.05, from $1.96. Another significant issue below the current price would be a bitter pill for existing holders.


On the nose

Complicated and opaque operating structures are also on the nose. Goodman is an owner, developer and fund manager, and is spending hundreds of millions of dollars establishing and propping up funds, when it should be reducing debt. Higher vacancies, lower rents and falling valuations also loom as a threat to the group’s viability. Either Goodman Group is a steal at current prices, or founding chief executive Greg Goodman is denying it the major reconstructive surgery it needs – or a white knight. Despite the security price falling 92% since 27 Aug 08 (Avoid – $3.06), we recommend you AVOID Goodman Group.


The Goodman PLUS securities are down 61% since 1 Aug 08 (Buy for Yield – $76.20), and we’re growing increasingly uncomfortable with Greg Goodman’s bravado. Since PLUS owners don’t have to worry about being diluted by another issue of ordinary securities, we’d welcome one with open arms. Until Goodman mothballs growth plans in favour of reducing debt, though, we’re increasing our risk ratings and downgrading the Goodman PLUS securities to HOLD.

Nathan Bell