Australian (ASX) Stock Market Forum

Debt/equity ratio

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gbang007

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hey guys,
Just need a hand on a couple of things with an assignment I am doing. I have to talk about some performance indicators about a lpt, I am doing stockland group. anyone know where I can find the average debt/equity ratio of asx 200 etc? and what is an acceptable level. I know it is dependant on each company's situation etc but is there anywhere where it states it generally?
 
Entire books and research papers have been dedicated to the debt/equity ratio and the "acceptable" level and there is no definite answer. Do some research on capital (financial) structure of a firm. Also look up the pecking order theory and Modigliani & Miller propositions/theory.
 
gbang007 said:
hey guys,
Just need a hand on a couple of things with an assignment I am doing. I have to talk about some performance indicators about a lpt, I am doing stockland group. anyone know where I can find the average debt/equity ratio of asx 200 etc? and what is an acceptable level. I know it is dependant on each company's situation etc but is there anywhere where it states it generally?
Click to expand...

property economics, due next monday?
 
gbang007 said:
hey guys,
Just need a hand on a couple of things with an assignment I am doing. I have to talk about some performance indicators about a lpt, I am doing stockland group. anyone know where I can find the average debt/equity ratio of asx 200 etc? and what is an acceptable level. I know it is dependant on each company's situation etc but is there anywhere where it states it generally?
Click to expand...

I would think the acceptable debt to equity ratio for companies would be different for every industry, it would be acceptable for property tohave a higher than normal debt though,..Simply because property is alot more stable, has regular predictable monthly cashflow and often as lower interest rates than other indusrties.
 
Ok these are the current gearing ratios for some of the major LPT players as I have them -

WDC 30%
MGR 30%
IOF 34% (36% 'look through' basis)
GPT 36% (47% 'look through' basis)
IIF 38% (46% 'look through' basis).

Anywhere in the 30 to 40% range is acceptable for an LPT IMO. Those with higher gearing have been hammered. Also look through is important as many of the unlisted JV funds have gearing from 50 to 65%.
 
Tysonboss1 said:
I would think the acceptable debt to equity ratio for companies would be different for every industry, it would be acceptable for property tohave a higher than normal debt though,..Simply because property is alot more stable, has regular predictable monthly cashflow and often as lower interest rates than other indusrties.
Click to expand...

That is the principle that CNP worked on and it hasn't proved to be right. You need to look at the repayment requirements regarding timing and the locked in interest rates. CNP also had regular cash flow, it hasn't helped a lot.
 
you guys got any other ratios that might be worth a look at? im looking at the overall risk profile of a company. already done beta, current and p/e ratio
 
gbang007 said:
why is this? slowing of the market so they won't gear as much coz its more volatile (market)?
Click to expand...

dont know some guy from credit suisse gave us a talk the other week and noted that those two hadnt slid as far as other mainly due to gearing levels and the size of both LPTS.... Westfield have a 30% market share in Aussie LPTs whilst Stockland is around 10%
 

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