smh 11.2.2011

Canny punters place bets on pubs deal
February 11, 2011
Traders in National Leisure and Gaming shares appear to have been trading well and truly on the outside when the stock nearly quadrupled, and almost 5 per cent of the company changed hands.

Canny investors have done the maths after reading a Monday statement from pubs and pokies operator NLG's landlord, Redcape Property Fund, and punting that a potential $200 million-plus pubs deal is in the wind.

Even so, NLG shares fell faster than the contents of a gambler's wallet after the stock was allowed to resume trading yesterday. The chairman, Peter Dransfield, told the market that as part of trying to extricate itself from loss-making territory it had been approached by various parties but nothing was ''sufficiently developed to warrant disclosure''. The stock fell 0.4? to 1.8?.

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Dransfield's statement was in response to a please-explain notice issued by the ASX on Wednesday, which resulted in the company suspending trading until it could explain what had happened.

Dransfield was not keen to elaborate beyond his response to the ASX's query, but was eager to know who had been buying his stock.

In reality, he probably need not have looked any further than Redcape's executive chairman, Colin Henson, who told the market on Monday that his group had been ''approached by a number of parties interested in acquiring a number of pubs [hotels] in one line''.

Henson, who has been working his way though an even larger bout of financial indigestion than NLG, was non-specific on potential buyers and what they were after.

Redcape has already sold about 10 of the 30 NLG freeholds under its wing, and it is a fair bet that the remaining 20 may be attractive to a buyer in one lump - Redcape thinks they are worth between $200 million and $300 million.

That's handy for Henson, who last year had to refinance $700 million of debt and, even though he has repaid $180 million from selling properties, is anxious to further appease his bankers.

NLG, by contrast, has reportedly been frustrated in trying to find someone to take a significant stake in its business and help recapitalise the company to please its banks, because some of the rents paid to Redcape are out of proportion to what the hotel operations turn over.

Before the run in its shares, NLG was capitalised at a pitiful $3.5 million - a pretty small additional cost for the leases if you were going to spend, say, $250 million buying the underlying land.

A few clever investors appear to have worked that out much faster than the rest of us, snapping up stock through Commsec to get ready for a potential takeover or re-rating of NLG.