After a miserable 2012, the new year has been a happy one for shareholders in FKP Property Group.
The Australia and New Zealand focused property and investment group got the gong of worst performing ASX 200 stock last year, plunging 57 per cent to a record low share price of $1.13 on December 31, 2012.
Following a 22 per cent drop in underlying profit in fiscal 2012 to $94.7 million, a stressed balance sheet pushed FKP to seek $208 million in a heavily discounted equity raising in the middle of last year, decimating the share price.
Chief executive officer Peter Brown packed his bags shortly afterwards, bringing his near 10 years of leadership to an end and ushering in Malaysian billionaire executive chairman Seng Huang Lee.
FKP’s proposed 7-for-1 stapled security consolidation, which greatly reduced the number of outstanding securities, was approved at the company’s AGM on November 30, after which the stock tanked further.
“After [the consolidation] it just went into free fall. It really got to the point where it was oversold,” Morningstar analyst Tony Sherlock said.
Since the low the stock has bounced back more than 50 per cent, giving investors the strongest share price appreciation of any ASX 200 company over the year to date.
However, after switching to a buy in December, Mr Sherlock has downgraded FKP to hold, with the stock looking relatively fairly valued after its run, although he is inclined to regard further falls as buying opportunities. “There’s a lot of uncertainty around the stock. I’d be more conservative with valuation on FKP since disclosure is a bit less than what I’d like to see,” he said.
FKP has been in the process of selling non-core assets and retiring debt to shore up its balance sheet and simplify its operations, most recently with the sale of Industroplex Rocklea in Queensland for $14 million and the selective buy-back of $12.3 million of convertible notes.
Despite some assets being divested below book value, the focus on debt reduction will be welcome after the bruising equity raising last year.
Management is in the process of hiving off its retirement assets into a separate vehicle, to potentially be finalised in the next few months. Despite the change under way at FKP, questions have been raised about the sustainability of its business model, heavily reliant on capital appreciation against a backdrop of flat or falling property prices.
FKP Price at posting:
$1.43 Sentiment: Hold Disclosure: Held
