Centro is currently paying interest on borrowed monies
$3.9 billion dollars needs to be refinanced before Feb 15 (#2)
An additional $3.4 billion dollars needs to be refinanced by the end of this year. (#2)
Projected profit this year 40c/share = $338m (includes provision of 2.7c/share = $22.8m for extra interest payments) (#2)
(Centro has forecast a $40m bill for sorting out the company but this is more than offset by the withholding of dividend payments for this year)
Suppose
a) Someone will lend money at 1% more than Centro is currently borrowing at:
then extra interest bill is 1% of $7.3b = $73m-$22.8m =$50.2m
b) as for a) but at 2% higher. Extra interest is then $146m-$22.8m = $123.2m
c) as for a) but at 3% higher. Extra interest is then $219m-$22.8m = $196.2m
Projected 2008 profits would then become
a) (1% extra) $338m-$50.2m= $287.8m (34.05c/share) b) (2% extra) $338m-$123.2m = $214.8m (25.42c/share) c) (3% extra) $338m-$196.2m = $141.8m (16.78c/share)
With the shareprice currently at ~53c and with even a 3% rise in interest rates the return (16.78c/53c*100 = 31.66%)looks like really excellent value. If my analysis is correct then I ask myself why aren't the shares being snapped up by some big cashed up insto who would also be prepared to provide the finance and also make a healthy profit in providing this finance
What Am I missing or what have I got wrong???
P.S. I am not an economist nor a financial advisor so don t rely on the above information when making your investment decisions
References (#1) Etrade CNP printable report (#2) Centro ASX Release Presentation - Centro Earnings Revision Refinancing Update 17Dec 2007
CNP Price at posting:
0.0¢ Sentiment: None Disclosure: Held