CER - Centro Retail Group
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Simple maths:
Assets - (Debt+ risk) = Value.
Value = Some value established in many ways but should be a value placed on something by a willing seller and a willing buyer. eg. The stock market. (Value is often shown by book value which may differ from priced value.)
The market has decided a value is 30c.
Source: News Bites
Orbis Global Equity Fund bought 26,435,953 Centro Retail Group securities worth $8,684,157 on April 1, increasing from 117,405,616 securities (5.14%) to 143,841,569 securities (8.29%).
STOCK DASHBOARD: April 03, 2008
obviously Orbis sees value there..
Orbis Global Equity Fund bought 26,435,953 Centro Retail Group securities worth $8,684,157 on April 1, increasing from 117,405,616 securities (5.14%) to 143,841,569 securities (8.29%).
STOCK DASHBOARD: April 03, 2008
obviously Orbis sees value there..
It's been some time since the CER thread was used. I'm surprised at the lack of interest shown in this stock considering the interest it has had on the stock market. CER has been a great one to trade in the last few months and trading the swings and the changing fortunes has enabled me to build up a reasonable holding for very little capital outlay.
The debt situation that CER was in created doubt that it would survive but the company was able to make financial arrangements that allowed it to survive without diluting the shares. By making some property sales at reasonable prices and avoiding fire sales the company is meeting its obligations.
After it reaches a point where it can recommence dividend payments it will rocket. The company is trading cash flow positive and its constitution says that profits must be distributed under certain conditions. These conditions should be approaching. Remember that the dividends paid in the past,each half year, exceed the current SP.
CNP has a +50% holding and has a debt burden that needs the dividends that CER could pay so that is one reason to expect that dividends will be paid as soon as possible.
CER is definitely worth looking at but DYOR.I'm not always right.
As far as I know Orbis still hold!!!!
The debt situation that CER was in created doubt that it would survive but the company was able to make financial arrangements that allowed it to survive without diluting the shares. By making some property sales at reasonable prices and avoiding fire sales the company is meeting its obligations.
After it reaches a point where it can recommence dividend payments it will rocket. The company is trading cash flow positive and its constitution says that profits must be distributed under certain conditions. These conditions should be approaching. Remember that the dividends paid in the past,each half year, exceed the current SP.
CNP has a +50% holding and has a debt burden that needs the dividends that CER could pay so that is one reason to expect that dividends will be paid as soon as possible.
CER is definitely worth looking at but DYOR.I'm not always right.
As far as I know Orbis still hold!!!!
Re: CNP - Centro Properties Group
Can anyone explain the reason why CER went up after the news release to 13.5c then dropped huge down to .91c to close. This seems rediculous considering the growth it made, was there some other news or something i missed after about 3pm ?
Can anyone explain the reason why CER went up after the news release to 13.5c then dropped huge down to .91c to close. This seems rediculous considering the growth it made, was there some other news or something i missed after about 3pm ?
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Re: CNP - Centro Properties Group
Buy the rumour sell the fact! Near perfect example of classic run-up to the announcement, then dumping after the news came out.
It was worth noting that a lot of the other property trust groups were being sold down while after the news was released, but before CER and CNP came out of halt. A fair warning that people were getting ready to dump
Buy the rumour sell the fact! Near perfect example of classic run-up to the announcement, then dumping after the news came out.
It was worth noting that a lot of the other property trust groups were being sold down while after the news was released, but before CER and CNP came out of halt. A fair warning that people were getting ready to dump
Re: CNP - Centro Properties Group
CER shares went down to $0.077 from $0.135 within 10 days. What is your prediction? Will it go up again? Would you suggest dumping it at a 40% loss? I bought $30k worth of stock on 7th of May, I went out for lunch, by the time I got back I lost about $10k. Been waiting for it to get back up, but it has been going down only. Any input will be greatly appreciated.
CER shares went down to $0.077 from $0.135 within 10 days. What is your prediction? Will it go up again? Would you suggest dumping it at a 40% loss? I bought $30k worth of stock on 7th of May, I went out for lunch, by the time I got back I lost about $10k. Been waiting for it to get back up, but it has been going down only. Any input will be greatly appreciated.
Re: CNP - Centro Properties Group
'Would you suggest I sell my shares at a 40% loss'... is a direct question requesting financial advice.
Having said that, when I first bought into the sharemarket, I didn't set stop-losses, and I got burnt bad. I've since learnt to set stop-losses. In fact, I bought CNP when it went from 48c to 55.7c (or similar)..... it closed an awful lot lower, and dropped, dropped, dropped since. Now it's pocket-change to me. I wish I had sold out the next day at 45c or similar... or better, had set a 15% stop.
Why did you buy CER? Has this reason changed since you bought CER? Do you still believe the reason you bought CER?
Or, was CER just an unresearched inexperienced buy hoping to catch a share because it's went up a lot higher in the short term? If so, may I suggest that you research into CER and then make a decision.
As to my thoughts on CER.... IMHO, it's one of the riskiest shares on the market. It has massive downside potential, and, IMHO, little immediate massive upside potential. When the global economy recovers, I don't think CER should be at the shareprice it currently is... if CER is still around.
Will CER be around...?
Also, *IS* there a CER thread, or just a CNP thread?
If (nearly all) we answered your question, we would be breaking the law. At the very least, forum rules.
'Would you suggest I sell my shares at a 40% loss'... is a direct question requesting financial advice.
Having said that, when I first bought into the sharemarket, I didn't set stop-losses, and I got burnt bad. I've since learnt to set stop-losses. In fact, I bought CNP when it went from 48c to 55.7c (or similar)..... it closed an awful lot lower, and dropped, dropped, dropped since. Now it's pocket-change to me. I wish I had sold out the next day at 45c or similar... or better, had set a 15% stop.
Why did you buy CER? Has this reason changed since you bought CER? Do you still believe the reason you bought CER?
Or, was CER just an unresearched inexperienced buy hoping to catch a share because it's went up a lot higher in the short term? If so, may I suggest that you research into CER and then make a decision.
As to my thoughts on CER.... IMHO, it's one of the riskiest shares on the market. It has massive downside potential, and, IMHO, little immediate massive upside potential. When the global economy recovers, I don't think CER should be at the shareprice it currently is... if CER is still around.
Will CER be around...?
Also, *IS* there a CER thread, or just a CNP thread?
Re: CNP - Centro Properties Group
I can't let that post go un challenged. I have CER as one of my mail holdings with a holding of well over a million shares. Firstly CER is trading profitably. It will not be diluted on the same basis as CNP because of different financial arrangements with the banks. It has been selling some assets to pay down debt at reasonable prices and is operating within the parameters set by its bankers. Based on the assets less liabilities it has a value of approx 72c share. The increasing value of the AUD is helping CER. The tennants in most of the CER properties are of a type that will not only keep trading but probably increase business during tough times. It is my personal opinion after carefully researching CER that it is way undervalued. I have been trading the swings and have half my holdings in CER free carried. There are a lot of traders in and out of this stock which makes it a volatile one. While I trade it I am in for the long haul.
This is as I see it. Everyone should do research on the fundamentals and make up their own mind.
I can't let that post go un challenged. I have CER as one of my mail holdings with a holding of well over a million shares. Firstly CER is trading profitably. It will not be diluted on the same basis as CNP because of different financial arrangements with the banks. It has been selling some assets to pay down debt at reasonable prices and is operating within the parameters set by its bankers. Based on the assets less liabilities it has a value of approx 72c share. The increasing value of the AUD is helping CER. The tennants in most of the CER properties are of a type that will not only keep trading but probably increase business during tough times. It is my personal opinion after carefully researching CER that it is way undervalued. I have been trading the swings and have half my holdings in CER free carried. There are a lot of traders in and out of this stock which makes it a volatile one. While I trade it I am in for the long haul.
This is as I see it. Everyone should do research on the fundamentals and make up their own mind.
Re: CNP - Centro Properties Group
CER is subject to a lot of trading and is subject to large swings. I use those swings to trade for "freebies". I have bought another 300000 in the last three days. If it is down I buy 100000 and sell again when I can get my money back by selling 80000. By doing that on a regular basis I have 750000 "freebies" in my CER holding. In my opinion it is way undervalued but DYOR. I am often wrong.
CER is subject to a lot of trading and is subject to large swings. I use those swings to trade for "freebies". I have bought another 300000 in the last three days. If it is down I buy 100000 and sell again when I can get my money back by selling 80000. By doing that on a regular basis I have 750000 "freebies" in my CER holding. In my opinion it is way undervalued but DYOR. I am often wrong.
Re: CNP - Centro Properties Group
Nioka, what part of my post do you have to "challange"?
Do you think it has massive downside potential? (It could go bust?)
Do you think it has immediate massive upside potential? (Note, "immediate").
Do you think CER will rise in price when the global economy recovers? (I do)
Do you think that CER WON'T rise in price if it is in liquidation before the economy recovers? (If CER is liquidated, I doubt CER would rise in price...)
Do you think that CER has massive risks attached? (The "this stock which makes it a volatile one." and the "CER is subject to a lot of trading and is subject to large swings." and the fact that CER has an awful lot of debt would tend to suggest that it is risky)...
What part are you challanging?
By all means, if he, like you, has done his research and is comfortable with his purchase than I'm definitly not saying he should sell. The share-price (massively) went down on no negative announcments. If he believes in the company, this probably means little. If he bought into the company knowing nothing abuot it, I suggested he did some research.
That's all...
Nioka, what part of my post do you have to "challange"?
Do you think it has massive downside potential? (It could go bust?)
Do you think it has immediate massive upside potential? (Note, "immediate").
Do you think CER will rise in price when the global economy recovers? (I do)
Do you think that CER WON'T rise in price if it is in liquidation before the economy recovers? (If CER is liquidated, I doubt CER would rise in price...)
Do you think that CER has massive risks attached? (The "this stock which makes it a volatile one." and the "CER is subject to a lot of trading and is subject to large swings." and the fact that CER has an awful lot of debt would tend to suggest that it is risky)...
What part are you challanging?
By all means, if he, like you, has done his research and is comfortable with his purchase than I'm definitly not saying he should sell. The share-price (massively) went down on no negative announcments. If he believes in the company, this probably means little. If he bought into the company knowing nothing abuot it, I suggested he did some research.
That's all...
Re: CNP - Centro Properties Group
You insinuate that it is one of the riskiest stocks around.
You say it has massive immediatedownside potential.
You say it has little immediate upside potential.
You say that when the economy recovers that the CER may not be around.
I say that all the research I have done on this stock points to the fact that you are completely wrong on all those statements. I have spent many many hours researching this stock.
You insinuate that it is one of the riskiest stocks around.
You say it has massive immediatedownside potential.
You say it has little immediate upside potential.
You say that when the economy recovers that the CER may not be around.
I say that all the research I have done on this stock points to the fact that you are completely wrong on all those statements. I have spent many many hours researching this stock.
Since CER is being discussed on the CNP threads I think it is time to post on this one.
CER is in my humble opinion one of the stocks around that will make a few millionaires out of some ordinary investors as the market recovers and I intend to be there with them to celebrate.
In order to show that this statement is not a ramp I include the following statements that I believe to be correct after spending many hours researching this stock.
CER is 51% owned by CNP but it is a seperate company, a retail trust. When both were in trouble with loans due to be repaid they negotiated a deal with the banks. Details are complicated and available on the companies web sites. The result was that CNP faces massive possible dilution in the future as a condition of the loan extension but CER faces no dilution but does have an undertaking to reduce some debt before any dividends are paid.This financing arrangement was made after difficult negotiations by the CEO. It seems to favour CER over CNP. I believe this was done to allow CER to continue to trade and return to paying dividends which would help CNP (who would get 51% of these dividends).
Now because CER is an investment trust it must distribute the major part of its profits or pay the full rate of tax on those profits a rate of 48%. Therefore CER will again return to paying dividends in the short term rather than in the long term. CNP needs the dividend,the banks need CER to pay that dividend.
a Return to the previous level of dividend should see the SP value at around $1.
There are many factors that point to CER being in a position to pay a dividend in the short term. They have made some property sales at prices that were not fire sale priced and are paying down debt as per the arrangements with the lenders.They continue to have a positive cash flow. Their tennants are mostly the type that actually increase trade as financial conditions worsen and their tennancy rate is holding up. Falling interest rates are helping them improve profitability and the increasing value of the AUD improves their hedging position.
CER is trading to a large diuscount on its asset value. If there was a new company starting now that wanted to develop the same assets it would have to raise capital by issuing the same number of shares at around $1.50 to raise sufficient funds. It would then have a construction period without income and a further period with reduced income while the tennants were found. That is what goodwill is all about and that is probably worth more on its own than the current market cap of CER.
The management has been positive and effective and continue to have the support of the lenders. I believe it is in the best interest of the lenders for CNP and CER to prosper and I could not see that support being withdrawn. It is in their interests that CER pay a dividend. Not to pay a dividend would only leave CER in the same position with the tax office collecting the 48%.
I have not seen any information that disputes these facts. There are plenty of statements that state the SP will fall. These are often followed by a drop in the SP which then rebounds in a pump and dump typical of day traders.
There is no doubt manipulation being attempted with this stock as it is a good stock for traders. I back this statement by the evidence that there is often a 1,000,000 order placed in the preopen trading that is usually withdrawn right before open and sometimes it can occur at the end of trading auction. It is obviously there to influence a price.
Anyone interested in CER should do plenty of research,there is a lot of information out there, then make up your mind backed up with the full facts.
DYOR. I am happy to debate the above.
CER is in my humble opinion one of the stocks around that will make a few millionaires out of some ordinary investors as the market recovers and I intend to be there with them to celebrate.
In order to show that this statement is not a ramp I include the following statements that I believe to be correct after spending many hours researching this stock.
CER is 51% owned by CNP but it is a seperate company, a retail trust. When both were in trouble with loans due to be repaid they negotiated a deal with the banks. Details are complicated and available on the companies web sites. The result was that CNP faces massive possible dilution in the future as a condition of the loan extension but CER faces no dilution but does have an undertaking to reduce some debt before any dividends are paid.This financing arrangement was made after difficult negotiations by the CEO. It seems to favour CER over CNP. I believe this was done to allow CER to continue to trade and return to paying dividends which would help CNP (who would get 51% of these dividends).
Now because CER is an investment trust it must distribute the major part of its profits or pay the full rate of tax on those profits a rate of 48%. Therefore CER will again return to paying dividends in the short term rather than in the long term. CNP needs the dividend,the banks need CER to pay that dividend.
a Return to the previous level of dividend should see the SP value at around $1.
There are many factors that point to CER being in a position to pay a dividend in the short term. They have made some property sales at prices that were not fire sale priced and are paying down debt as per the arrangements with the lenders.They continue to have a positive cash flow. Their tennants are mostly the type that actually increase trade as financial conditions worsen and their tennancy rate is holding up. Falling interest rates are helping them improve profitability and the increasing value of the AUD improves their hedging position.
CER is trading to a large diuscount on its asset value. If there was a new company starting now that wanted to develop the same assets it would have to raise capital by issuing the same number of shares at around $1.50 to raise sufficient funds. It would then have a construction period without income and a further period with reduced income while the tennants were found. That is what goodwill is all about and that is probably worth more on its own than the current market cap of CER.
The management has been positive and effective and continue to have the support of the lenders. I believe it is in the best interest of the lenders for CNP and CER to prosper and I could not see that support being withdrawn. It is in their interests that CER pay a dividend. Not to pay a dividend would only leave CER in the same position with the tax office collecting the 48%.
I have not seen any information that disputes these facts. There are plenty of statements that state the SP will fall. These are often followed by a drop in the SP which then rebounds in a pump and dump typical of day traders.
There is no doubt manipulation being attempted with this stock as it is a good stock for traders. I back this statement by the evidence that there is often a 1,000,000 order placed in the preopen trading that is usually withdrawn right before open and sometimes it can occur at the end of trading auction. It is obviously there to influence a price.
Anyone interested in CER should do plenty of research,there is a lot of information out there, then make up your mind backed up with the full facts.
DYOR. I am happy to debate the above.
a good read. This is a copy of a post from another forum.
Source: The Australian Financial Review BOSS Magazine; Pages 24-28 [Volume 10; May 2009]
Story: Nick Lenaghan
HURDLE JUMPER
THE NEW CENTRO CHIEF FACED DAUNTING OBSTACLES WHEN HE FLEW IN WITH A MISSION TO TURN AROUND THE BESIEGED PROPERTY GROUP
The eyes are the windows to the soul, it's said. For several months after he arrived at Centro's worldwide headquarters in suburban Melbourne, Glenn Rufrano did his soul-searching in the middle of a vast, open-plan office as his 150-member corporate team laboured in cubicles around him.
"One day I must have looked like I wasn't happy," he recalls. "Someone came up to me and said, 'Gee, you know Glenn, a number of the staff are worried. You're looking like you're worried today.' I realised that I'm sitting in the middle of this floor and even though I don't know it, people are looking at me and saying, 'Holy Mackerel, depending upon that guy's face maybe we have a job tomorrow or maybe we don't.'"
On reflection, Rufrano puts the day at some time in May last year when the pressure from Centro's Australian lending syndicate was most intense - at one point the banks confined their rollover period on $2.8 billion debt to a mere seven days. "I remember saying, 'Oh my goodness, I'd never have thought my daily activity would impact the folks around me.' I had to rethink how I moved around the office a bit."
It was a rare lapse for Rufrano, whose slight but energetic frame on most days exudes the sense of poise and purpose that bespeak a clear mind. And presumably a great set of lungs, given the 59-year-old's enthusiasm for scuba diving and jogging. Indeed it was stamina above all else that Rufrano would need for one of the biggest corporate rescue jobs in Australia.
After spending the best part of the past four decades in New York working his way up from his first job in valuations through the biggest property market in the world, the boy from Brooklyn knew most of what there was to know about real estate. Until he arrived at a place a long way from home, at Centro's HQ based in its own shopping centre, named coincidentally - or perhaps fatefully - The Glen.
By January last year, when Rufrano headed to the Melbourne suburb of Glen Waverley for his first day at the office, Centro was in deep trouble. One month earlier, the giant retail landlord had opened a Pandora's box with its announcement that it was unable to refinance $3.9 billion in short-term debt falling due and had instead won a reprieve until mid-February.
Suddenly the share price was in the toilet, two shareholder lawsuits were looming, and chief executive Andrew Scott, the architect of Centro's meteoric success, had quit. The chief financial officer had also departed "on extended leave for health reasons". Centro's 740-odd Australian staff were bewildered and despondent from the sudden reversal of fortune; some were literally on the brink of bankruptcy themselves.
Then there were the 23 banks and insurance companies considering very carefully whether it was time to pull the plug. In the local parlance, it was a sandwich with only one filling when former Centro chairman Brian Healey offered Rufrano the job.
"It was a bit of a surprise. Not a total surprise," Rufrano recalls. "Everybody knew something was going to have to happen. I made the assumption that if Andrew [Scott] was going to leave - and I didn't know that - they'd just bring in someone from Australia."
Perhaps more surprised was Rufrano's wife when her husband canvassed the prospect of a year Down Under. "It was actually my 35th wedding anniversary about this time. So I said to my wife 'Mary, I'm thinking of doing this.' She said 'What are you talking about?' She'd never been to Australia. I said, 'It will be fine; it will be an adventure.' Both my kids were gone. We'll go away. We'll fall in love again. We'll make another life of it. I always just looked at it as a great challenge and an adventure and the right thing to do."
Source: The Australian Financial Review BOSS Magazine; Pages 24-28 [Volume 10; May 2009]
Story: Nick Lenaghan
HURDLE JUMPER
THE NEW CENTRO CHIEF FACED DAUNTING OBSTACLES WHEN HE FLEW IN WITH A MISSION TO TURN AROUND THE BESIEGED PROPERTY GROUP
The eyes are the windows to the soul, it's said. For several months after he arrived at Centro's worldwide headquarters in suburban Melbourne, Glenn Rufrano did his soul-searching in the middle of a vast, open-plan office as his 150-member corporate team laboured in cubicles around him.
"One day I must have looked like I wasn't happy," he recalls. "Someone came up to me and said, 'Gee, you know Glenn, a number of the staff are worried. You're looking like you're worried today.' I realised that I'm sitting in the middle of this floor and even though I don't know it, people are looking at me and saying, 'Holy Mackerel, depending upon that guy's face maybe we have a job tomorrow or maybe we don't.'"
On reflection, Rufrano puts the day at some time in May last year when the pressure from Centro's Australian lending syndicate was most intense - at one point the banks confined their rollover period on $2.8 billion debt to a mere seven days. "I remember saying, 'Oh my goodness, I'd never have thought my daily activity would impact the folks around me.' I had to rethink how I moved around the office a bit."
It was a rare lapse for Rufrano, whose slight but energetic frame on most days exudes the sense of poise and purpose that bespeak a clear mind. And presumably a great set of lungs, given the 59-year-old's enthusiasm for scuba diving and jogging. Indeed it was stamina above all else that Rufrano would need for one of the biggest corporate rescue jobs in Australia.
After spending the best part of the past four decades in New York working his way up from his first job in valuations through the biggest property market in the world, the boy from Brooklyn knew most of what there was to know about real estate. Until he arrived at a place a long way from home, at Centro's HQ based in its own shopping centre, named coincidentally - or perhaps fatefully - The Glen.
By January last year, when Rufrano headed to the Melbourne suburb of Glen Waverley for his first day at the office, Centro was in deep trouble. One month earlier, the giant retail landlord had opened a Pandora's box with its announcement that it was unable to refinance $3.9 billion in short-term debt falling due and had instead won a reprieve until mid-February.
Suddenly the share price was in the toilet, two shareholder lawsuits were looming, and chief executive Andrew Scott, the architect of Centro's meteoric success, had quit. The chief financial officer had also departed "on extended leave for health reasons". Centro's 740-odd Australian staff were bewildered and despondent from the sudden reversal of fortune; some were literally on the brink of bankruptcy themselves.
Then there were the 23 banks and insurance companies considering very carefully whether it was time to pull the plug. In the local parlance, it was a sandwich with only one filling when former Centro chairman Brian Healey offered Rufrano the job.
"It was a bit of a surprise. Not a total surprise," Rufrano recalls. "Everybody knew something was going to have to happen. I made the assumption that if Andrew [Scott] was going to leave - and I didn't know that - they'd just bring in someone from Australia."
Perhaps more surprised was Rufrano's wife when her husband canvassed the prospect of a year Down Under. "It was actually my 35th wedding anniversary about this time. So I said to my wife 'Mary, I'm thinking of doing this.' She said 'What are you talking about?' She'd never been to Australia. I said, 'It will be fine; it will be an adventure.' Both my kids were gone. We'll go away. We'll fall in love again. We'll make another life of it. I always just looked at it as a great challenge and an adventure and the right thing to do."
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Has anyone any further updated veiw or info on CER?
Coy is reporting on 24 August. The deal MCW (Macquarie Countrywide) has done suggests that CER is likely to cop a similar 18% writedown on its US shopping center assets, as the cap rate it used at the end of Dec 08 was broadly similar to the one MCW used.
Now CER is exposed to US shopping centers through 3 vehicles. Super LLC, CSF, and US REIT. The biggest is Super LLC, but here CER is at risk only to the extent of its investment in the vehicle. It is not liable for its debts. At the end of Dec 08, CER's investment in Super LLC was equal to 27 cents a share. That's the amount CER will lose, and probably has already lost it.
The other two vehicles are smaller, and a 18% writedown in asset values will probably cost CER another 16 cents a share.
Then there are the Australian properties, totalling about $1.7bn. Occupancy rates are high (over 99%), so any writedown on these will merely reflect the rise in cap rates. This rise is probably in the order of 5%, which will knock off another 3-4 cents a share in NTA.
So in total, we are looking at possibly 47c being lopped off from the 72 cents NTA reported for the end of Dec 08. This leave NTA of 25cps. This, however, does not include any benefit from currency changes, and have not been adjusted for the few assets that CER has sold at small discounts to book value since Dec 08.
CER's cash flows in the US and in Australia should remain relatively stable, given that the coy reported in its March 09 quarter update, rental growth in both regions, despite occupancy rates slipping further in the US. This suggests that its interest cover should still be between 2.5 to 3 times, which should keep the banks at bay.
This also means that CER's earnings before asset writedowns, ie operating earnings, are likely to be strong in the $350m-$400m region, equivalent to 12-14 cents a share! Unfortunately, all this will be swamped by the big losses after asset writedowns. And it is this (the big losses) that will attract press headlines!
CER does have about $600m of CMBS debt in Australia that it has to refinance before the end of 09. Given that ING Industrial Fund has been able recently to refinance its CMBS debt, one would expect CER, which already has support from its banking syndicates, to be able to do likewise.
So it appears to me that CER at 9.8c, is trading at about 40% its likely new NTA. Future dividend is likely to be very low to nil, sourced only from its taxable profits (being a trust), as all remaining cash will go to reduce debt, which is not a bad thing.
With its look through gearing at around 65% at Dec 08, (possibly lower now given some asset sales), CER may struggle to trade any higher than 40% NTA. Other stocks (GPT, DXS, MGR) are on about 65-70% NTA, but have gearing levels of below 30%.
For CER to trade any higher, debt will have to come down, dividend has to increase, and its association with CNP will have to be cut, a process Glen Rufrano and the Board are working.
So it looks like the downside in CER at 9.8c, is limited. But so is its upside. 15cents is probably all one can expect, if the August results do not contain anything worst that what I have outlined above.
Welcome any thoughts and analysis.
Coy is reporting on 24 August. The deal MCW (Macquarie Countrywide) has done suggests that CER is likely to cop a similar 18% writedown on its US shopping center assets, as the cap rate it used at the end of Dec 08 was broadly similar to the one MCW used.
Now CER is exposed to US shopping centers through 3 vehicles. Super LLC, CSF, and US REIT. The biggest is Super LLC, but here CER is at risk only to the extent of its investment in the vehicle. It is not liable for its debts. At the end of Dec 08, CER's investment in Super LLC was equal to 27 cents a share. That's the amount CER will lose, and probably has already lost it.
The other two vehicles are smaller, and a 18% writedown in asset values will probably cost CER another 16 cents a share.
Then there are the Australian properties, totalling about $1.7bn. Occupancy rates are high (over 99%), so any writedown on these will merely reflect the rise in cap rates. This rise is probably in the order of 5%, which will knock off another 3-4 cents a share in NTA.
So in total, we are looking at possibly 47c being lopped off from the 72 cents NTA reported for the end of Dec 08. This leave NTA of 25cps. This, however, does not include any benefit from currency changes, and have not been adjusted for the few assets that CER has sold at small discounts to book value since Dec 08.
CER's cash flows in the US and in Australia should remain relatively stable, given that the coy reported in its March 09 quarter update, rental growth in both regions, despite occupancy rates slipping further in the US. This suggests that its interest cover should still be between 2.5 to 3 times, which should keep the banks at bay.
This also means that CER's earnings before asset writedowns, ie operating earnings, are likely to be strong in the $350m-$400m region, equivalent to 12-14 cents a share! Unfortunately, all this will be swamped by the big losses after asset writedowns. And it is this (the big losses) that will attract press headlines!
CER does have about $600m of CMBS debt in Australia that it has to refinance before the end of 09. Given that ING Industrial Fund has been able recently to refinance its CMBS debt, one would expect CER, which already has support from its banking syndicates, to be able to do likewise.
So it appears to me that CER at 9.8c, is trading at about 40% its likely new NTA. Future dividend is likely to be very low to nil, sourced only from its taxable profits (being a trust), as all remaining cash will go to reduce debt, which is not a bad thing.
With its look through gearing at around 65% at Dec 08, (possibly lower now given some asset sales), CER may struggle to trade any higher than 40% NTA. Other stocks (GPT, DXS, MGR) are on about 65-70% NTA, but have gearing levels of below 30%.
For CER to trade any higher, debt will have to come down, dividend has to increase, and its association with CNP will have to be cut, a process Glen Rufrano and the Board are working.
So it looks like the downside in CER at 9.8c, is limited. But so is its upside. 15cents is probably all one can expect, if the August results do not contain anything worst that what I have outlined above.
Welcome any thoughts and analysis.
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CER' latest writedown....the last?
CER today reported a 5% writedown for the 6 months to June 2009 for its Australian properties, and a 14% writedown on its US shopping centers, which is less than the 18% taken by Macquarie Countrywide recently.
On my estimate, this reduces CER's equity in Super LLC to just 9 cps, which implies a 18cps writedown on the 27cps it had in the vehicle at the end of Dec 08. Remember, all that CER can lose in Super LLC is its investment. It is not liable for the loans.
The Australian and the rest of the US writedown takes off roughly another 18cps.
That makes a total of 36cps, which therefore leaves CER with 36 cps NTA, down from 72cps.
That's still FOUR times its share price, and at what looks like the bottom of the property market.
If the US economy is bottoming and will resume growth in the second half year, CER looks like a very good punt/option on that recovery. This writedown could be the last big one. Any further writedown will mostly likely be small, and there is a chance that the writedown in the US may actually be partially offset by increments in value in the much stronger property market and economy in Australia.
As always, when the mood changes, greed returns. So whilst CER's corporate structure is still complicated (being simplified), it may start to attract a few predators.
The banks have agreed to extend the major loans to end 2010 and 2011. That should give CER enough time, as the recovery progresses, to sell a few more assets, at close to book value, to reduce its gearing.
Not all clear yet, of course, but if the risk with punting on CER pays off, it will pay off in big times. But do your research before taking the plunge.
The rally in the stockmarket, as always, is concentrated in the early stages stocks leveraged to the perceived economic recovery, eg materials and industrial cyclicals. It will soon spread to banks and other sectors.
Remember, also, that on the investment clock, properties always recover after the stock market. So not just CER, but a large number of the REITs have the potential to double or triple from current levels. At those levels, many will still be only 30% of where they were at the peak. These peaks are probably best consigned to history. But we don't need them to make significant gains from current depressed levels. Good Luck
CER today reported a 5% writedown for the 6 months to June 2009 for its Australian properties, and a 14% writedown on its US shopping centers, which is less than the 18% taken by Macquarie Countrywide recently.
On my estimate, this reduces CER's equity in Super LLC to just 9 cps, which implies a 18cps writedown on the 27cps it had in the vehicle at the end of Dec 08. Remember, all that CER can lose in Super LLC is its investment. It is not liable for the loans.
The Australian and the rest of the US writedown takes off roughly another 18cps.
That makes a total of 36cps, which therefore leaves CER with 36 cps NTA, down from 72cps.
That's still FOUR times its share price, and at what looks like the bottom of the property market.
If the US economy is bottoming and will resume growth in the second half year, CER looks like a very good punt/option on that recovery. This writedown could be the last big one. Any further writedown will mostly likely be small, and there is a chance that the writedown in the US may actually be partially offset by increments in value in the much stronger property market and economy in Australia.
As always, when the mood changes, greed returns. So whilst CER's corporate structure is still complicated (being simplified), it may start to attract a few predators.
The banks have agreed to extend the major loans to end 2010 and 2011. That should give CER enough time, as the recovery progresses, to sell a few more assets, at close to book value, to reduce its gearing.
Not all clear yet, of course, but if the risk with punting on CER pays off, it will pay off in big times. But do your research before taking the plunge.
The rally in the stockmarket, as always, is concentrated in the early stages stocks leveraged to the perceived economic recovery, eg materials and industrial cyclicals. It will soon spread to banks and other sectors.
Remember, also, that on the investment clock, properties always recover after the stock market. So not just CER, but a large number of the REITs have the potential to double or triple from current levels. At those levels, many will still be only 30% of where they were at the peak. These peaks are probably best consigned to history. But we don't need them to make significant gains from current depressed levels. Good Luck
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Centro Retail Trust (CER)
Is the 13 cents share price saying this stock is still in intensive care and should be avoided, or is it a situation with big potential as yet unrecognised or ignored value?
Latest full year operating earnings (ignoring all the writedowns the worst of which are probably behind us) was $185m, or 8.1 cents a share. NTA has been carved down to 30 cents a share. Gearing is 70% but the banks have extended debt repayment to end 2010 or 2011. Australian shopping centres are 99.5% occupied and the ones in the US 90% tenanted - not bad at this stage of the cycle.
So share price is just over 40% NTA, and the earnings yield is over 60%, which is another way of saying, if some buys this company, it will have its money paid back in 1.6 years!
Debt is $3bn, but interest cover is 2.3 times. So it is well and truly paying all loan interest without any problem.
With the property market believed to be bottoming (Westfield thinks so), is CER likely to remain ignored for long?
The company will have a board and management separate from Centro Properties (CNP). Surely, if CER is doomed, these people would think twice about coming on board. You would think they have some plans for realising the value that seems so apparent in this company.
Any thoughts anyone?
Is the 13 cents share price saying this stock is still in intensive care and should be avoided, or is it a situation with big potential as yet unrecognised or ignored value?
Latest full year operating earnings (ignoring all the writedowns the worst of which are probably behind us) was $185m, or 8.1 cents a share. NTA has been carved down to 30 cents a share. Gearing is 70% but the banks have extended debt repayment to end 2010 or 2011. Australian shopping centres are 99.5% occupied and the ones in the US 90% tenanted - not bad at this stage of the cycle.
So share price is just over 40% NTA, and the earnings yield is over 60%, which is another way of saying, if some buys this company, it will have its money paid back in 1.6 years!
Debt is $3bn, but interest cover is 2.3 times. So it is well and truly paying all loan interest without any problem.
With the property market believed to be bottoming (Westfield thinks so), is CER likely to remain ignored for long?
The company will have a board and management separate from Centro Properties (CNP). Surely, if CER is doomed, these people would think twice about coming on board. You would think they have some plans for realising the value that seems so apparent in this company.
Any thoughts anyone?
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- 27 April 2009
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