CNP - Centro Properties Group

[Sunder]

From what I've read, it really does seem to be the model and the market not matching, (High debt in credit crunch time) nothing fundamentally wrong with the business.

Am I missing something?

Is it worth knife catching this one?

 

[nioka]

Is it worth knife catching this one?

That is not a question to ask on ASF. It is one you can only ask yourself. Some of the information available here will give an answer one way and other information will go the other way. Regardless of all that someone should only act after deciding how much risk they can afford to take.

 

[Sunder]

That is not a question to ask on ASF. It is one you can only ask yourself. Some of the information available here will give an answer one way and other information will go the other way. Regardless of all that someone should only act after deciding how much risk they can afford to take.

Yeah sorry, bit of a rhetorical question. Wasn't meant to be applied to my personal situation.

Meant to provoke some comment on whether people thought the right model in the wrong market was a death sentence or just a temporary set back.

 

[vida]

From what I've read, it really does seem to be the model and the market not matching, (High debt in credit crunch time) nothing fundamentally wrong with the business.

Am I missing something?

Is it worth knife catching this one?

Hi Sunder; its not just the timing, its the inability to pay debt when it falls due now and the banks are relied on to extend. Yes I think this will happen as in this market the banks have even more to lose if they don't agree. Its not a matter of cutting losses, its a matter of adding to the bank's massive losses which can be avoided if they extend and wait till market improves.

It has to improve eventually as the world economy will not sink to oblivion at this low SP it may be worth risking a falling knife catch, but I wouldn't be buying too many. If the banks extend and it very likely they will it there should be a big spike in the SP .. and the extention will have to be a lot longer than December to be feasible and workable

I am not happy but I have decided not to sell at this low SP as the value left is not that much and since there is a chance it could turn out ok... it doesn't need a really big spike for me to break even as I bought in relatively low

 

[vida]

I agree with Sunder that asking ASF members whether its worth the risk is something for you to decide. Only you know what you can afford to lose. This stock at this stage is a very high risk gamble. It may be rewarding and it may turn to dust before our eyes and very soon too.

If anyone here knew how things would turn out and whether it was a buy we would all be buying and becoming very wealthy soon, but unfortunately it is not the case. We have no idea and only go by what we read in the media.

 

[Sunder]

Hi Sunder; its not just the timing, its the inability to pay debt when it falls due now and the banks are relied on to extend.

Let me just clarify this - My understanding was that they can service the debt, but can't renew the loan or repay it in whole.

If the value of their assets exceeds the amount owing, I can't see this as being a death knell. Of course banks would do as much as possible to extend the deadlines, otherwise they'd have a whole lot of assets which don't belong to their core business.

Of course, if they ever reached a situation where they could not service the debt, then the company is worthless.

 

[nomore4s]

From what I've read, it really does seem to be the model and the market not matching, (High debt in credit crunch time) nothing fundamentally wrong with the business.

Am I missing something?

Is it worth knife catching this one?

lol, high debt in credit crunch time and nothing fundamentally wrong with the business?

Just have a look at the chaos being caused by companies in the US with high debt and overpriced assets atm.

This company is up to its eyeballs in debt and a lot of uncertainity about the sale & value of its assets and you think there is nothing wrong with the fundementals?
Have alook at the chart - what does that tell you? Set any warning bells off?

Why anyone would even comtemplate buying this now is beyond me, it's now below 7.5c, why not wait till it at least starts going back up before buying in. Even if you buy at 11-15c once all the problems are sorted out you will still be able to make good money.

 

[tigerboi]

Re: CNP-sub 10c as predicted

ive been saying for months cnp & bnb are just giant ponzis for suckers,they own NOTHING cnp have humungous debts of about $17b...

it justs bewilders me how anyone could put their hard earned coin into this & not only that but continue to deny its a goner!talk about rome burning...stay away from this...tb

 

[MR_B]

Re: CNP-sub 10c as predicted

ive been saying for months cnp & bnb are just giant ponzis for suckers,they own NOTHING cnp have humungous debts of about $17b...

it justs bewilders me how anyone could put their hard earned coin into this & not only that but continue to deny its a goner!talk about rome burning...stay away from this...tb

tb, I bet you also have posts on other threads to say when you have been wrong also, probably something like "I said this would fail but I was wrong" ? Or you don't make any wrong decisions? Anyways, I'm pretty sure people don't need to see your 'told you so' garbage. The people buying these shares, as myself, obviously would know it is a risk. We KNOW it could all be gone, your 'I told you so's' are just going to be anoying for no reason. Its the same as saying 'told you so' to someone that loses money on the pokies, you know people that win, but the odds are against it.

 

[Sunder]

lol, high debt in credit crunch time and nothing fundamentally wrong with the business?

Just have a look at the chaos being caused by companies in the US with high debt and overpriced assets atm.

If that was the case, negative gearing would never succeed Oh wait, that's all coming unravelling in every western world too, isn't it?

If the yield the company can get is greater than the interest rates their creditors are asking, the problem is not with their business model. The problem is with their creditors asking for debt which is being serviced, to be recalled.

The question is, is this the case? Are CNP borrowing at 8% or whatever it happens to be, and returning 10% on their investment? Or are they getting 6%? My understanding was that cashflow wasn't a problem. The problem is the banks want their money back, despite the fact that the debt is being serviced.

 

[freddy2]

If that was the case, negative gearing would never succeed Oh wait, that's all coming unravelling in every western world too, isn't it?

If the yield the company can get is greater than the interest rates their creditors are asking, the problem is not with their business model. The problem is with their creditors asking for debt which is being serviced, to be recalled.

The question is, is this the case? Are CNP borrowing at 8% or whatever it happens to be, and returning 10% on their investment? Or are they getting 6%? My understanding was that cashflow wasn't a problem. The problem is the banks want their money back, despite the fact that the debt is being serviced.

With this logic banks should offer any profitable company infinite leverage, there would be no need for equity only debt. The fact that business earnings fluctuate means your logic is wrong. CNP's business model was completely flawed, in that they borrowed way too much money.

 

[nomore4s]

If that was the case, negative gearing would never succeed Oh wait, that's all coming unravelling in every western world too, isn't it?

If the yield the company can get is greater than the interest rates their creditors are asking, the problem is not with their business model. The problem is with their creditors asking for debt which is being serviced, to be recalled.

The question is, is this the case? Are CNP borrowing at 8% or whatever it happens to be, and returning 10% on their investment? Or are they getting 6%? My understanding was that cashflow wasn't a problem. The problem is the banks want their money back, despite the fact that the debt is being serviced.

The question would then be why do the banks want the money back?
The big problem is the equity in the assets has dissappeared and this is making the banks very nervous in the current markets.
Also debt is now more expensive and that is catching up with companies like this.

I don't trade on F/A but even I can see that the business model was flawed, when you load up on excessive debt on overvalued assets it is only a matter of time before it all blows up in your face.

I'm not really sure you can compare negative gearing to the way these types of companies operate.

Alot of companies paying the price for greed and fancy finacial engineering imo

 

[redandgreen]

'The big problem is the equity in the assets has dissappeared and this is making the banks very nervous in the current markets.'

how do you come to this conclusion?

Look through gearing of 73.9% ( though high, should still be manageable).

NTA 69c

 

[nomore4s]

'The big problem is the equity in the assets has dissappeared and this is making the banks very nervous in the current markets.'

how do you come to this conclusion?

Look through gearing of 73.9% ( though high, should still be manageable).

NTA 69c

Again Fundies aren't my strong point.

The point I'm making is these assets aren't worth what they were when purchased, and I believe they are having trouble selling these assets now, which further devalues them, which in turn makes the banks nervous.

This company may or may not trade through its current problems but having huge levels of debt in this current market is not a good thing imo.

 

[vida]

Again Fundies aren't my strong point.

The point I'm making is these assets aren't worth what they were when purchased, and I believe they are having trouble selling these assets now, which further devalues them, which in turn makes the banks nervous.

This company may or may not trade through its current problems but having huge levels of debt in this current market is not a good thing imo.

Hi No More 4s.. that's right the assets are not valued at the same level today as they were when purchased, but that can be said for a lot of asset classes at the moment. This is only a problem if CNP are forced to sell their quite substantial assets at very low prices which they are trying to avoid.

Eventually the markets will stabilise, asset values and credit markets will recover so if the banks are willing to wait they can get all their money back. It only makes sense that they should want to wait rather than liquidate the assets now and suffer a massive loss. In meantime they are earning interest.

This scenario seems to be the general opinion/outlook but who knows what will happen? The banks may just give up and decide to write it all off but why would they do that? It doesn't make sense as if they were going to do that they would have gone down that road ages ago. It all sucks really and I wish I had sold my holding when I was in profit, but greed made me hold on.

I can manage the loss and to write off, but I am not happy about it.

 

[vida]

'The big problem is the equity in the assets has dissappeared and this is making the banks very nervous in the current markets.'

how do you come to this conclusion?

Look through gearing of 73.9% ( though high, should still be manageable).

NTA 69c

the equity in the assets has not disappeared. I wish that people who who have nothing to offer the thread and intrude with half baked comments & who don't have any involvement in the shares would just stay out of it here

 

[vida]

I am not sure of course, as no one can be, but the fact CNP management and its lenders did not agree to sell the assets at a lower price than negotiated in July, is a good sign. If they thought the company would fold up with the sale falling through they would have agreed to lower the price. It may not be correct perception but it seems to me that CNP are able to hold out and pull the sales because its bankers supported that decision. That should be an encouraging sign I would think although the media haven't taken that viewpoint at all but prefer to see it means CNP going down and dying

 

[vida]

At least one article sees the silver lining!! A little better insight here.

*******************************************************

Centro shares fall as US sale terminated Maurice Dunley | September 16, 2008

CENTRO'S $US714 million ($880 million) US shopping centre sale has fallen over in a setback described by analysts as pushing the group even closer to administration.

In one of its darkest days since the troubled shopping centre owner and manager revealed a $3.9 billion funding shortfall in December, Centro's battered shares fell to record lows yesterday as investors baled out.

Centro's head stock dropped 31.4 per cent to 7.2c, while its retail trust fared little better, with a 31 per cent fall.

The timing could not have been worse for Centro, which by the end of this month must satisfy Australian lenders and US noteholders that it can implement a rescue plan before another December 15 deadline, when it is due to repay $450 million.

Centro chief executive Glenn Rufrano put his best foot forward yesterday with new plans to break up the 29-property Centro America Fund portfolio and re-offer it for sale in two or three lots.

But there was no hiding Mr Rufrano's bitter disappointment that the sale to an undisclosed US pension fund -- brokered through an adviser -- did not go ahead.

He had, however, flagged that possibility on Friday, only hours before negotiations on a highly conditional purchase contract signed in July abruptly ended.

The silver lining for Centro, however, has been the backing it received from the banks to reject Friday's bargain basement purchase offer, which was reportedly well below the original $US714 million contract price.

That bodes well for Centro's chances of clearing the September 30 hurdle, although Mr Rufrano said he did not think the failed US sale would have any effect on that deadline.

In its statement to the Australian Securities Exchange, Centro said discussions with the previously contracted buyer continued.

But Centro is determined to maintain the upper hand and, with the support of its lenders, will be able to approach other buyers in a sale process that should take two to three months to finalise.

The previous price of $US774 million represented only a 10 per cent discount to book values, but with US financial and property markets going from bad to worse, the sale price will be lower.

Centro would not reveal the final pension fund offer but, according to analysts, the discount could have been 20 per cent or more.

Centro has been under similar pressure to drop the asking prices of its Australian shopping centres, but has so far held the line. The group has reportedly encountered problems finding buyers for big-ticket items, among them the $600 million Centro Bankstown centre, which was recently withdrawn from official sale.

However, a round of sales of properties under $75 million is likely in weeks. The Southport Centre on the Gold Coast is expected to be among the first of these properties.

Centro Properties Group closed at 7.2c, down 3.3c, while Centro Retail Group closed at 10c, down 4.5c.

 

[tigerboi]

Re: CNP-low of 5c today

lets see who can pick its low of lows today...5c for me...get out while the going is only terrible...tb

 

[Sunder]

the equity in the assets has not disappeared. I wish that people who who have nothing to offer the thread and intrude with half baked comments & who don't have any involvement in the shares would just stay out of it here

This is what I'm arguing - although I'm not sure I'd be quite so antagonistic.

I'm still shopping at Centro Bankstown. I drive past Centro Roselands on the way to work. Heck, on my way to Newport the other day, I saw a sign to Centro Warriewood. The physical assets are still there, and the shops are still full of people paying rent. That part of the model is good, they have their shops, and they are full.

The question is - how much STOCKHOLDER equity is still there? Say for every $1 raised using shares, they borrowed $9. Let's make it a theoretical $100m and $900m for $1b (Totally theoretical)

If they bought $1b worth of shopping centres, and the price of the physical real estate fell to $800m, then stockholder equity is wiped out, and they are in negative equity - hence why banks might want the money back, and shares go to a few cents each.

But if the rent is enough to service the debt, and investors believe that in a few years, the real estate would go to 2 Billion, the company does not need to be wound up - in fact, with a long term view, it would be massively under priced.

Once again, let me clarify. I am not offering or seeking advice. I am provoking debate and asking for people to poke holes in my "ifs and buts".