Correct, it even factors in if they had to spend $300/psqm to clear the land/demolish the malls, and the land value decreased 20-35% off the current valuations, take out all the debt, that would make around 12% on the current share price, if I am reading it right.
There are a few analyst's with Buy, not just Goldman Sachs, it will be interesting what the Q2 results will look like, if it's to negative maybe the price will dip further, but hopefully the anchor stores like Coles, Woolworths, Fast Food chains etc are paying rent.
SCG is my largest holding, and I'm quite comfortable putting more into this because of the assets, liquidity and current ridiculous price. I feel like in the coming months, this will be the stock that people wish they had bought. Anyway see how it goes.
"For the purposes of this analysis, we apply a 35% discount to book in order to arrive at a market-implied value of A$24.1bn for SCG’s Mall portfolio (vs a Dec-19 bookvalue of A$37.5bn).
For the purposes of this analysis, we assume that SCG’s flagship Westfield Sydney is retained, but assume that a purchaser of SCG would apply a 20% discount to Dec-19 book value.
We assume that Westfield Parramatta is disposed of as an Office development site for a sale price 23% below Dec-19 book value and implying A$27k per sqm site area. This isin line with the price paid for an Office development site in the Parramatta CBD by GPT last month, and represents a discount to the A$32k per sqm of land area paid by MGR in 2017 to secure 75 George St, Parramatta.
This leaves a market-implied value of A$19.8bn for the balance of SCG’s portfolio. If anew owner was to acquire these assets for the purposes of demolition and redevelopment, they would also be acquiring the income stream associated with the assets. For the purposes of this analysis, we assume that a purchaser would attribute value to three years’ worth of NOI (providing holding income during the design and planning process) declining by 15%pa vs Dec-19 passing income levels. We note that this is not the assumption that we apply for our base-case SCG forecasts. Rather, we are assuming that any party valuing SCG as a land play would not be renewing expiring leases as they roll off, and hence NOI would decline over time.
Finally, we allow for demolition costs equating to A$300psqm of existing GLA in order toarrive at an implied value for the cleared sites.
This leaves us with a market-implied value of A$17.2bn for SCG’s share of the land that sits below all of its Malls ex Sydney and Parramatta (401ha). This equates to A$4,301 per sqm."
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