market expects a 40% writedown on assets

and a breach of the 50% gearing covenant and with the banks

it is the only way one can make sense of what is happening

1.the expected rate of return is right out of wack - 31% for a cash machine. ridiculous

2. bookvalue is way over the market price @ 98c

if the company does breach its debt covenant it'll probably be over for gpt

unless they can get another capital raising away

but would assets have fallen by 40%

I can't see it happening

check out my calculations for expected rate of return and gearing ratios

first expected rate of return implied by market price
v
v
v


rents seem to have held up pretty well. the last divi was $0.021


multiply that by 4 and get 8.4c

.084/.27 = 31%

risk free rate = 4.4%
equity premium = 26.7%

expected rate of return is 31%

now check out the gearing ratio and decline in assets of say 30% and 40%
v
v
v

assumptions
*capital raising of 1 for 1 @ 60c
*total writeoff of the jv
*a 30% decline in asset values
*a 40% decline in asset values


the original NTA was $3.82 just before the capital raising

equity = $8.4 bn
no of shares = 2.2 bn
$8.4bn/2.2bn = $3.82

the balance sheet looked like this
assets $14 bn
debts $5.6
equity $8.4

* we've just had a 1 for 1 equity raising @ 60c which was used to reduce debt

2bn shares x .60 = $1.3 bn

assets $14 bn
debts $4.3bn
equity $9.7 bn

equity $9.7 bn
no of shares = 4.4 bn

bookvalue = $2.20

then there is the JV with BNB

$2bn was leant to the jv

jv balance sheet looked like this

assets $7bn
debt $5 bn
equity $2bn

the JV has been written down to zero

you therefore have to knock off $2bn from the balance sheet

assets $12bn
debts $4.3 bn
equity$7.7 bn

bookvalue = (7.7/4.4) = $1.75

* next include 30% reduction in asset values

assets $12bn
debts $4.3 bn
equity$7.7 bn

assets $9.23bn
debts $4.3bn
equity $4.93bn

bookvalue = $1.12
gearing = 46.5%

lets see what happens if you have a 40% writedown on assets
assets $8.6bn
debts $4.3 bn
equity $4.3 bn

bookvalue = $0.98

gearing 50% but in breach of the bank's 50% covenant

gameover

what are the chances that that will happen?

the only other thing I can think of is another capital raising