the fundamentals

After buying in at 25.3c ave I have kept doing the numbers for my own peace-of-mind and, for what it is worth have some to share.

This is to put some substance to the 'positive' view vs. the lack of detail I have seen from the doomsayers:

(1) If the business survives I think we can all agree that at the current SP it represents excellent value (ie. 2009 company guidance EPS, 19.3c, consensus forecast 11.8c for 2010, high distributions once reinstated, etc, etc).

(2) So what if GMG fails?

Debt profile:
2009 = $438 mill ($300 mill just provided by MQG)
2010 = 649 mill
2011 = 480 mill
2012 = 846 mill
2013 = 1,083 mill
>013 = 576 mill = Total $4.07 billion

I've already stated that I think that this debt profile is manageable and GMG will be able to reduce it to keep bankers happy by a combination of operating cash, asset sales, and MQG and one other 'deal'.

However if it fails then:

Balance sheet as at 31/12/2008

Cash and equivalent assets = $1.01 billion
Property and equivalent = $7.35 billion
Intangibles (mgmt rights) = $1.29 billion

Debt = 4.07 billion
Other business expenses due = 1.07 billion

Net position as at 31/12/08 = $4.51 billion

Thus to repay all the debt GMG needs to realise assets for the process - i.e. sell properties

Assume that intangibles are worthless (this is unlikely given that management rights produced EBIT of $86 mill for the 1H09. Someone will buy these rights)

Assume that cash and cash equivalents are realised at face value (after all it is cash!)

Then work out discounted property asset sales to find out at what point equity holders are left with zero.

The numbers below show the discounted asset sales and the NET amount per unit left for shareholders AFTER all debt is repaid:

100% = $1.16
90% = $0.89
80% = $0.63
70% = $0.37
65% = $0.23 <------- roughly where the SP is now
60% = $0.10
57% = $0.02 <------- Nothing left for shareholders


Thus if you think business will survive - BUY.

If however, you want to plan for worst case scenario, the SP has ALREADY factored in a firesale of property assets at 35% discount to book value and NO value for management rights which generated $86 million EBIT for 1H09.

...come on, GMG is oversold and IMO a buy.