The APW portfolio

I find it somewhat confounding that almost everything in the property sector has performed strongly in recent times yet APW languishes in comparison. The chart compares the share price performance of APW with two of its largest listed investments: BWR and ARF (over the past 12 months). On my calculations, these two investments are currently valued at about $8.8m and $11.9m and have rallied 29% and 17.5% over the past 12 months. This merely reflects what is happening in the property space with cap rates compressing in a world of low interest rates. One only has to look at recent announcements from CMA and GMF, to name but two, to know that this theme continues to be evident in the market. Yet APW has delivered a negative return over the past year.

Further, from what I hear, Australian Unity's impending public offering of the Office Fund is basically walking out the door (demand from fund managers seeking income is high). This will likely lead to a further revaluation of APW's stake (recent valuation was about $5.9m) upon this listing on the ASX, though I do not know if APW will hold on to all of its stake.

On my calculations, APW's NAV has increased to about 21c per unit yet the market's reluctance to acknowledge the portfolio's growth remains. What do holders believe is the best course of action from here?

If further cash is realised by selling into some of this strength does the board increase its payout ratio from 80% to 100%. This could increase the yield beyond 8%, tax deferred, which would potentially attract more investors currently getting 2% in a bank account. As such, I believe this should at least be considered.

Does APW institute another buyback? At a ~40% discount to NAV this creates immense value for those holders who remain while income per security also increases.

Would APW consider doing a consolidation and turn what is now potentially seen as a penny dreadful into a credible small cap property securities fund? Look what BWR has achieved since consolidating 10 to 1 (up ~35% in capital growth in little over a year, 45% including income).

Do they do all of the above?

While management has done an effective job of stabilising the vehicle in recent times (and I give them credit for that), I believe now is the time to crack the whip a little.

Interested to hear the thoughts of other holders.