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CER - Centro Retail Group

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My stock of the day for discussion.

CER is trading well below its NTA. Even the value of those assets are well below replacement value as they have been revalued down to match values to GFC conditions.

I have had a little experience with retail shopping centres. I have built three. The first had three shops, the second one had four and the third had eleven. Small by Centro standards but the principles are the same. I have also owned three commercial properties. I think I can talk from a point of view that is influenced by experience. I also hold a reasonable holding in CER.

CER has assets that are basically bricks,mortar and the land it stands on. My recent building activity showed me how the costs of these developments are rising and rising. If CER or any other REIT company wanted to do similar development to the property they own then the costs would far exceed the current valuations. These costs are engineers designs, enviromental impact statements, DA approval costs, council contributions (ridiculously high) and above all the cost of the time these things take before you start on the site.
Building costs are high (and all plus GST).

When you complete the project there is the problem of finding tennents. The tennants you get in a new set up are of two types. The first are successful ones that want a discounted rent and a rent free period to move in. The others are wannabees that will fail in the first year. CER has been through these stages and has, in most cases, reliable tennancy. This is the goodwill of their business and should be considered an asset for the valuation of the
business. Actual valuations now are well below replacement cost. CER havs valuable goodwill backed up with experienced management.

With these things in mind I found it a better proposition to buy CER shares than to build another arcade.

CER almost folded under a burden of debt and the problems the banks had with the GFC. These problems appear to be under control. They have never stopped trading profitably. They have reduced debt. They have remained well tennanted.

I am looking forward to the annual report. This report should include an update on the restructure of the company and its move towards independance from CNP who hold a 51% interest in CER. That report is due shortly.

DYOR.

CER did not pay a dividend this year. I am not worried about that as I believe the profit was used within the company to add value and reduce debt. We will see how it was used when we get the annual accounts.
 
Hey Nokia, i was going to bump this up shortly to ask questions, i took some advice from my brother some years ago (my first investment) i bought in at 1.40..... have since learn't that i do not listen to my brother whatever he says.... however i am considering a top up to even things out.. i had a gut feeling it might be time to jump back on board some more..

when you think about the company. like you said they do own alot of property, and would for sure have alot of income.. then there is the debt.. might take till the end of the year to see something positive.. but it has to happen some time..


Actually edit that... i own shares in CNP..
 
Announcement today that the close-outs of leverage contracts have effectively raised NTA by 5c since June 30. That would mean NTA is now 38c, while price is 18c. Plus, they are looking for ways to restructure/recapitalise.
 
Kremmen said:
Announcement today that the close-outs of leverage contracts have effectively raised NTA by 5c since June 30. That would mean NTA is now 38c, while price is 18c. Plus, they are looking for ways to restructure/recapitalise.
Click to expand...

The stock seems to be rising nicely, too bad I did not buy more at 18c it is now trading at 24 and looks like it will breakthrough the previous high of 27c, it may possibly even reach 38c.
 
Tekwrek said:
Looks like it has broken through 30 and now at 31c
Click to expand...

31.5c. Looks like yesterday's speeding ticket from the ASX has done nothing to slow it down.

Looks like few ASF users care, because nobody even has it in the tipping comp and it certainly has enough potential upside to be worth someone giving it a shot.
 

She is a beauty touching 32c today.
 
While running various scans tonight CER came up as weak and a sell. The thrust up with above average volume closing lower than open, high overall volume dropping off along with indications of overbought for the moment are evident.
 
Wysiwyg said:
The thrust up with above average volume closing lower than open, high overall volume dropping off along with indications of overbought for the moment are evident.
Click to expand...
Noticed a green day closing on 33c. Would have dropped lower if I had not posted my analysis. Spiteful buggers.
 
Wysiwyg said:
Would have dropped lower if I had not posted my analysis. Spiteful buggers.
Click to expand...

Fits your sig line perfectly!

I suspect the issue is that management have made comments that they are working towards a recapitalisation of some kind. If they do manage to arrange any reasonable swap of equity for some of their huge debt, things will be looking up. Their earnings, if unencumbered by constant debt questions, would be pretty decent.
 
For a long time now there has been confusion between CER and CNP. That is about to end. CER will now be an entity in its own right, standing tall in the property market. CER has always had a positive NTA but has been dragged down by the negative NTA of CNP. The lenders have now taken command. Basically they have taken over the assets of CNP in exchange for the debt and in the wash up CER will have a much lower debt ratio but have the hedge funds as the major shareholder, replacing CNP.

So it is business as usual for CER with only Australian assets and trading profitably. I can see an early return to dividend payments. I expect to see fluctuations in the SP but with a gradual upward trend. I expect to accumulate more along the way.

For CNP I hold out little hope that there will be any value left for shareholders after the vultures fight over the carcass.

That's how I read the latest announcements. DYOR.
 

Additionally, CER was dragged down by the complexities of the inter-relations between the Centro group companies. It's good that the directors have been eliminating those, such as the foreign exchange hedges. Certainly, it would be even better if other Centro parts were all to be taken over, broken up, or whatever.

I could never understand how CNP's price stayed above CER for so long, when CNP has appeared doomed ever since the US property crash.

[I hold CER.]
 
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