huntley's report - fair value 0.25

FYI... Fair Value ($)0.25

Huntley's Report

Sections from report below:

Event Analysis
Recommendation: Speculative Buy



Note: marker indicates prices of $0.10 at publication date

Price based on previous close

Fair Value ($)0.25

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Impact

Downside risk is minimized through the non-recourse structure while 50% of potential upside is retained.

Debt terms seem reasonable with three-year maturities, no gearing covenant, an undemanding debt service cover covenant of 1.0x and a weighted average interest margin of 134bps.


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Huntley's Report

Valad Property Group(VPG)

02 Jul 2009 | Cuts losses in Europe |

Investment Rating

Valad Property Group (VPG) is one of Australia´s newer AREITs, being a stapled security comprising a unit in the trust and a share in the management company. VPG has four interlinked business streams - each based on a 'value-add´ to investment property - being development and trading, capital services, ownership and funds management, with assets in Australia, Europe and the UK. While rental income and funds management fees form stable earnings for VPG (96% of 1H09 EBITDA), short-term stability is dependent on no losses from the riskier businesses of development, trading and capital services, which will form the medium-term growth drivers. Short-term price volatility is expected to be extreme. VPG is currently high risk and should only be considered by investors willing to speculate on a positive medium-term outlook.

Result Description

VPG formed a 50:50 joint venture (JV) with the Bank of Scotland (BOS), contributing most of its European / UK assets and all associated debt. VPG retains 100% ownership of its European funds management platform which will manage the JV.

The company contributed $851m of property assets and investments plus $761m of associated liabilities. It will also contribute around $43m in cash. BOS contributed undisclosed assets and liabilities.

All debt within the JV is non-recourse to VPG. All cash and profits generated will be used to retire debt.

VPG values its stake in the JV at zero.

Impact

Downside risk is minimized through the non-recourse structure while 50% of potential upside is retained.

Debt terms seem reasonable with three-year maturities, no gearing covenant, an undemanding debt service cover covenant of 1.0x and a weighted average interest margin of 134bps.

Recommendation Impact (Last Updated: 02 Jul 2009)

No change

Event Analysis
Recommendation: Speculative Buy



Note: marker indicates prices of $0.10 at publication date

Price based on previous close

Fair Value ($)0.25

Morningstar Style Box


Moat Rating None

Business Risk Speculative

Mkt Cap ($m)$133.00

Annual Avg T/O460.9

Previous Close$0.08

52 Wk high/low$0.64 / $0.02

ROE (--)--

Net Interest Cover21.90%

Ex-Dividend24 Jun 2008

Payable29 Aug 2008

Company Beta 2.00

Sector Beta1.12

6/07(a) 6/08(a) 6/09(e) 6/10(e)
NPAT 109.1 -248.0 24.7 29.7
EPS 16.0 -16.3 1.5 1.8
EPS % Chg 7.4 -201.9 -- 20.0
DPS 11.1 11.1 0.0 0.0
Franking % -- -- 0.0 0.0
Div yield% 6.3 7.9 0.0 0.0
P/E 0.5 -- 5.5 4.6