From the SMH this morning.Analysts hail Goodman decision to shun...

From the SMH this morning.

Analysts hail Goodman decision to shun IIF entitlement offerOctober 31, 2009

ANALYSTS have welcomed Goodman Group's decision to not take up its entitlement offer in ING Industrial Fund (IIF) as it will allow a greater focus on the group's development pipeline.

Although IIF's $700 million offer was oversubscribed, Goodman said it wanted to use the funds elsewhere. Its stake has reduced from 10 per cent to 4.5 per cent.

Analysts at Goldman Sachs JBWere said: ''Goodman's management is focusing on returns from its development pipeline and the cornerstone investments in Goodman's managed funds platform.

''We do believe Goodman will outperform relative to its real estate investment trust [REIT] peers over the next 12 months or so. Accordingly, for REIT-only investors, we suggest Goodman presents a relative sector buy opportunity.''

Goldman Sachs JBWere analysts said the key to future earnings per share growth was reducing the $1.3 billion of capital employed in land/development.

''Assuming these funds are used to repay debt, we estimate a meaningful earnings benefit of about $65 million,'' they said.

Meanwhile IIF has completed the institutional component of the recently announced fully underwritten capital raising.

The institutional component raised $474 million via an institutional placement of $156 million and $318 million from the institutional component of the accelerated one-for-one non-renounceable entitlement offer. The offer price for the new units under the institutional offer was 48 cents.

IIF's chief executive, Paul Toussaint, said he was pleased with the strong support the fund received from its existing institutional unitholders. The retail entitlement offer runs from Tuesday until November 27.

''This capital raising is the completion of stage two of our capital management initiatives and significantly enhances IIF's balance sheet,'' Mr Toussaint said.

Carolyn Cummins