my revised nta calc arrives at 1.711, page-39

I have said many times that CER is a good value play. Even with huge write-downs, the safety margin between NTA and SP will provide enough cushion for the value investors (VIs) to be interested.

I sensed that until the 15/12, most VIs were on the sidelines fearing something from left-field, which as we now know didn't happen with CER. I do feel there is still some uncertainty around the 15/1 ann, driven primarily from the inability of Centro to clearly disclose what is going on... oh and the fear whipped up by the media. There is still concern over the hedge book, which could well show a huge liability in the YE accounts due to currency swings. If CER can resolve the litigation in early 2009, this would also take some of the weight off.

I have not been through the numbers, but just looking at the course of sales, there is no evidence to suggest Orbis or indeed any other very large holder is exiting their position. Remember CER has 2.2bn shares on issue, 51% of which is owned on a look-through basis by Centro. The daily volumes we are seeing do not suggest a mass panic sale.

In fact, applying some logic to the situation: why would a value investor (VI) who accumulated a large holding over the past few months now exit? Orbis for instance kept buying until the end of November. VIs look for margin of safety (MOS). If you believed there was a MOS in the last few months, the 15/12 announcement would have served to reinforce the fact, not disprove it.

VIs typically use cash to make purchases so they do not feel the pressure that T+x or margin traders do when the price goes down. So long as VIs are confident that the MOS exists they keep positions, safe in the knowledge that over time we will see mean reversion (which is one of the certainties in financial markets). The short-term traders have to exit and that is what I think we witnessed with the snowballing late last week.

IMO, the sensible investor (or in the words of Ben Graham, "Intelligent Investor") does the kind of research we see on this and other threads, understands the fundamentals / intrinsic value (including MOS), waits for the right time and then backs the truck up to buy. So long as the MOS is large enough, the market will revalue the stock up over time... as it always has done.