If some is going to make a play on GPT, then Monday will be the day as Div goes Ex, the US got hammered pressuring a massive sell down. Assuming someone is accumulating im predicting a turn-over of 90-100million shares and a green SP.
Good Luck all, a 12% on dividend yield from operating cash flow makes it a very good target. Its quite amazing that WDC can trade above NTA and GPT is sitting at a $2 discount on NTA with top quality assets. If there can simplified their business and manage to sell their Hotel/resort/homemaker/US senior housing then their structure will significantly be simplified, have cash for CAPEX and a lower gearing, this will also mean T/O potential as only the quality asset is left in GPT.
GL all holders, I’m starting to be more confident as the day passes. I’ll be participating for the DRP too as I wouldn’t be surprise of manipulation on GPT’s SP so underwriters can buy on the cheap (but im extremely bias :D)
New DB valuation 28/8/08
Friday was a very good day, some noticeable mention on the re-rating below is that the TP of $1.60 is assume the abosolutly worse case scenario. They also have a SOTP valuation of $2.80 assuming basic sale is met.
Noticeable comments: “M&A potential. GPT have a high quality domestic asset portfolio with good medium term development potential. Further, operating costs including European expansion & development are up from $37m (06) to $92m (07) – potential synergy to a bidder. As discussed in our report of 24th April 2008 (A fine line) hypothetically, a takeover at NTA ($3.86) is feasible, however, in our view, there is significant uncertainty in assessing the JV equity valuation. This in our opinion creates a significant impediment to takeover. We also note that co-ownership agreements over GPT assets may limit control of assets acquired in the event of M&A, which must be considered in the event of takeover.”
Price Target, valuation, risks Our revised PT of $1.60 is set at a discount to our SOTP valuation (detailed below) which takes into account the potential for asset write-downs and further deterioration in operating performance. Further, we view the potential risk of asset write downs as problematic for GPT’s existing loan covenant. Our revised PT of $1.60 equates to a prospective yield of 12.5% which in our opinion appears reasonable in the current market given the higher level of risk to equity holders associated with GPT’s higher levels of gearing. GPT’s equity valuation remains extremely subjective, given the leverage and absence of comparable transactions. Our SOTP valuation based on 2008 EBIT is $2.80. Key multiples applied are as follows: We value GPT’s total equity investment in the JV at c.$770m, down from last stated book value of c.$1.9b. This is broadly consistent with an un-leveraged reduction in asset values of c.20% within the JV. We adopt forecast EBIT from funds management to c.$13m (Australia & Europe) with a multiple of 12x; We have allowed for dilution from additional shares on issue under the DRP. We have assumed Dec-07 book values for the remaining equity accounted investments, including GPT’s co-investments into Australian managed funds. We adopt cap rates of 6.25% on core domestic retail & 6.5% office assets – unchanged. Downside risks Significant uncertainty associated with asset sale process & uncertainty regarding the implication of GPT’s capital requirements & impact on equity valuation. Upside risks include M&A potential. GPT have a high quality domestic asset portfolio with good medium term development potential. Further, operating costs including European expansion & development are up from $37m (06) to $92m (07) – potential synergy to a bidder. As discussed in our report of 24th April 2008 (A fine line) hypothetically, a takeover at NTA ($3.86) is feasible, however, in our view, there is significant uncertainty in assessing the JV equity valuation. This in our opinion creates a significant impediment to takeover. We also note that co-ownership agreements over GPT assets may limit control of assets acquired in the event of M&A, which must be considered in the event of takeover. Other upside risks include domestic asset sales to reduce debt & restore confidence. Valuation sensitivity & equity recapitalisation We have re-run our NAV estimates using an average decline of 20-30% for asset values from current book values. We have also allowed for development and funds management earnings streams to decline by a further 20% across the board, and have applied a 10x EBIT multiple to these earnings streams. This results in an NAV forecast for GPT of $1.95/security. With respect to equity recapitalization, we assumed a 20% discount to current price, varying shares on issue in order to increase the equity base & (reduce debt) to a level of 50% debt/assets. For GPT we estimate equity capital of $1.7b would be required in order to reduce gearing from 64% look through to 50% look through under the sensitivity. Assuming an issue price at 20% discount to current price, then we estimate dilution to NAV in the order of 13% with the NAV under the sensitivity moving from $1.95 to $1.69/GPT security. Refer our report 8 August 2008, Australian REIT Sector, Defensive All Over Again? for further details.
GPT Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
(20min delay)