GPT - GPT Group

[nulla nulla]

I must have tempted fate last week. I chose GPT in the stock tipping competition and it ended the week testing the support level of $3.59 (interday low of $3.56). Ouch.



GPT is due to announce a dividend arround $0.05 in the early part of August, payable late August/early September. The yield is still above 5%, the price earnings is low arround 10:1, the share is trading at a discount to NTA, the debt/borrowings are around 17%, and, from memory, the latest fund raising was repayable in Aud$ so a fall in the Aud$ against the US$ doesn't impact earnings etc. So why the big fall?

Share:	GPT
Date:	2-Aug-13
Closing Price	3.59
Issued Shares	1,742,852,344
Capital	6,256,839,915
Earnings $	0.3360
ROE	9.36%
Dist $	0.198
Yield %	5.52%
P/E	10.68
NTA $	3.73
Discount to NTA	3.75%

For this post I am using an 18 month weekly chart (as against the usual 6 month daily chart) and an 18 month chart of the Aud$ versus the US$:



Extracting the closing prices at each week end back to a point of parity between the Aud$ and the US$ into an excel spread sheet, I was able to setup the following table showing the GPT share price in Aud$ and converted to US$:

GPT-US$
		Share Price
Date	US$-Aud$	Aud$	US$
15-Jun-12	1.009	3.19	3.22
22-Jun-12	1.006	3.21	3.23
29-Jun-12	1.024	3.29	3.37
6-Jul-12	1.021	3.34	3.41
13-Jul-12	1.023	3.33	3.41
20-Jul-12	1.038	3.40	3.53
27-Jul-12	1.048	3.39	3.55
3-Aug-12	1.047	3.42	3.58
10-Aug-12	1.058	3.38	3.58
17-Aug-12	1.042	3.54	3.69
24-Aug-12	1.040	3.51	3.65
31-Aug-12	1.032	3.51	3.62
7-Sep-12	1.038	3.61	3.75
14-Sep-12	1.057	3.52	3.72
21-Sep-12	1.046	3.42	3.58
28-Sep-12	1.038	3.40	3.53
5-Oct-12	1.018	3.52	3.58
12-Oct-12	1.023	3.55	3.63
19-Oct-12	1.033	3.56	3.68
26-Oct-12	1.037	3.51	3.64
2-Nov-12	1.034	3.49	3.61
9-Nov-12	1.039	3.46	3.59
16-Nov-12	1.034	3.40	3.52
23-Nov-12	1.046	3.48	3.64
30-Nov-12	1.043	3.49	3.64
7-Dec-12	1.048	3.60	3.77
14-Dec-12	1.057	3.56	3.76
21-Dec-12	1.040	3.66	3.81
28-Dec-12	1.037	3.70	3.84
4-Jan-13	1.048	3.67	3.85
11-Jan-13	1.053	3.65	3.84
18-Jan-13	1.050	3.60	3.78
25-Jan-13	1.042	3.69	3.84
1-Feb-13	1.040	3.83	3.98
8-Feb-13	1.031	3.88	4.00
15-Feb-13	1.022	3.78	3.86
22-Feb-13	1.032	3.87	3.99
1-Mar-13	1.020	3.89	3.97
8-Mar-13	1.023	3.94	4.03
15-Mar-13	1.040	3.79	3.94
22-Mar-13	1.044	3.75	3.92
29-Mar-13	1.040	3.71	3.86
5-Apr-13	1.042	3.85	4.01
12-Apr-13	1.050	3.95	4.15
17-Apr-13	1.027	4.09	4.20
26-Apr-13	1.028	4.09	4.20
3-May-13	1.032	4.05	4.18
10-May-13	1.002	4.14	4.15
17-May-13	0.973	4.12	4.01
24-May-13	0.965	3.90	3.76
31-May-13	0.957	3.89	3.72
7-Jun-13	0.949	3.72	3.53
14-Jun-13	0.957	3.74	3.58
21-Jun-13	0.922	3.71	3.42
28-Jun-13	0.914	3.84	3.51
5-Jul-13	0.907	3.86	3.50
12-Jul-13	0.904	3.83	3.46
19-Jul-13	0.917	3.78	3.47
26-Jul-13	0.926	3.65	3.38
2-Aug-13	0.890	3.59	3.20

From this I was able to creat a chart in excel plotting the moving value of GPT in US$:



When GPT hit Aud$4.09 it was worth US$4.20 and although it hit a peak of Aud$4.14 the dollar was sliding and it was only worth US$4.15. On Friday GPT closed at Aud$3.59 worth US$3.20. The drop from US$4.20 to US$3.20 (almost 25%) must be hurting foreign investors big time. No wonder they are selling out. With the Aud$ expected to trade lower it would not be surprising to see the likes of GPT slip lower, posibly even testing the support level of $3.39.

On the plus side, at some point, you would reasonably expect the yield, low price earnings ratio, discount to NTA, strength and diversity of assets, must start appealing to the same off-shore investors looking for long term returns. Has there been any upgrade/change to the earlier mentioned broker accumulate/buy ratings?

 

[coolcup]

On the plus side, at some point, you would reasonably expect the low price earnings ratio... must start appealing to the same off-shore investors looking for long term returns. H

I suspect you will find that the P/E you are stating includes revaluation gains (non cash in nature) in the denominator as earnings. REITs (like GPT) have to revalue their asset base every so often and any gain is passed through the profit and loss statement and hence pops up in REIT earnings. The gain is unrealised and is only actually captured by investors if the underlying asset is sold. Kind of like buying your house for $100 and saying it is worth $120 based on an independent valuation a few years later, and declaring a $20 profit that year to recognise the gain. There is nothing wrong with this per se but important to note that this is not like on like with earnings of general corporates which don't include reval gains (eg Woolworths earnings do not include reval gains).

This therefore understates the P/E and why REITS tend to report "operating earnings" which strip out the reval gains and more closely align with the cash flow being generated by the underlying assets. On this basis, GPT's P/E is closer to 14-15x from memory, perhaps even higher.

In terms of what institutional investors are worried about, well the biggest concern is really how GPT manages to hit its long term earnings growth target of CPI + 2-3%. This implies ~5-6% earnings growth. The nature of the underlying assets provide longer term fixed rental growth of 3-4% which means there is a gap to bridge to get them to their 5-6% target. Management have been achieving this in recent history by buying their shares back accretively (which is getting harder given their P/E is much higher); cutting overheads (again limited in scope); cancelling out of the money hedges (which delivers an IRR of ~3.5% but boosts accounting earnings significantly). Now that this easy fruit has been taken, the question is how they will drive higher than CPI growth going forward. Also in an environment where retail tenants are flexing their muscles and demanding lower rents with GPT's portfolio exposed ~50% to retail from memory.

 

[nulla nulla]

I suspect you will find that the P/E you are stating includes revaluation gains (non cash in nature) in the denominator as earnings. REITs (like GPT) have to revalue their asset base every so often and any gain is passed through the profit and loss statement and hence pops up in REIT earnings. The gain is unrealised and is only actually captured by investors if the underlying asset is sold. Kind of like buying your house for $100 and saying it is worth $120 based on an independent valuation a few years later, and declaring a $20 profit that year to recognise the gain.

I'm not sure what point you are making here. Your quote is selective in that you have only referred to one of four points made as to why I think it is reasonable to think at some point soon, GPT should return to favour. The 2012 Annual Report released by GPT to the market on 14 February 2013, readily available per the ASX or GPT web sites clearly shows:

1. Net profit after tax of $594.5 million for year ending 31 December 2012...;
2. Realised operating income (ROI) of $456.4 million up 4.0% from December 2011;
3. ROI (Realised operating income) per ordinary security of 24.2cents...;
4. Cash disrtribution of 19.3 cents per security, and
5. NTA per security of $3.73.

On page two of the release, the Changes in fair value of Assets is added in boostng earnings from the ROI of $0.242 to the Iress/Huntleys sourced earnings per share figures in the table of $0.336. Security holders that receive their "distributions" (not dividends) also receive a covering tax note at the end of each fiscal year providing the break down of tax components including the taxable capital gain on revaluations passed on to the share holders/security holders.

There is nothing wrong with this per se but important to note that this is not like on like with earnings of general corporates which don't include reval gains (eg Woolworths earnings do not include reval gains).

Again I'm not sure the point you are trying to make. The structure of A-REIT's (mostly as stapled securities) is different to companies in other sectors. A-REIT's do "distributions" not "dividends", the tax treatment is different and no comparison with Woolworths or other non A-REIT's companies have been made.

This therefore understates the P/E and why REITS tend to report "operating earnings" which strip out the reval gains and more closely align with the cash flow being generated by the underlying assets. On this basis, GPT's P/E is closer to 14-15x from memory, perhaps even higher.

As stated above, GPT reports "realised operating income" (ROI), last year $0.242 per share. Also GPT has a policy of trying to distribute arround 80% of ROI which is why the distribution was $0.193 cents per share.

Interestingly at the bottom of page one of the report under "Guidance" GPT indicates:

1. 2013 forcast EPS growth of at least 5%; and
2. Payout ratio of 80% of ROI .

There is a footnote (5) EPS defined as Realised operating income per ordinary security. I'm not sure you should be stripping out asset revaluations from earnings, particularly if there is a taxable component of capital gain included in the distribution.

In terms of what institutional investors are worried about, well the biggest concern is really how GPT manages to hit its long term earnings growth target of CPI + 2-3%. This implies ~5-6% earnings growth. The nature of the underlying assets provide longer term fixed rental growth of 3-4% which means there is a gap to bridge to get them to their 5-6% target. Management have been achieving this in recent history by buying their shares back accretively (which is getting harder given their P/E is much higher); cutting overheads (again limited in scope); cancelling out of the money hedges (which delivers an IRR of ~3.5% but boosts accounting earnings significantly). Now that this easy fruit has been taken, the question is how they will drive higher than CPI growth going forward. Also in an environment where retail tenants are flexing their muscles and demanding lower rents with GPT's portfolio exposed ~50% to retail from memory.

The "outlook" per page five of the release was "cautiously optimistic for 2013....targeting growth in earnings per security of at least 5%". At this stage there haven't been any profit warnings from GPT and if I recall correctly even J.P.Morgan were recently rating it a "buy", after attending a GPT hosted office tour, with a target price of $4.33.

Personaly I don't think that the current share price action is a result of "what institutional investors are worried about". The volumes traded are not indicative of "institutional investors" being concerned. To me the current price action is more likely the result of retail investors, that entered when the share price was less than $3.00, taking their profits before it falls further and offshore investors that bought in on the run up of the last year or so getting out before the fall in the Aud$ completely wipes out their capital gains.

However, I am not a financial adviser, which is why I generally end my posts with the note "do your own research and good luck".

 

[coolcup]

I'm not sure what point you are making here. Your quote is selective in that you have only referred to one of four points made as to why I think it is reasonable to think at some point soon, GPT should return to favour.

Hi mate

Apologies I did not mean to intimate that your conclusion regarding GPT was at all flawed. I am of a similar view that the A$ is hurting offshore investors as you have very rightly pointed out. Part of my work role is to speak regularly to the large institutional investors in the A-REIT space and I just wanted to point out a couple of things in which they differ to the analysis which you presented above (which is also perfectly valid):

1. The P/E ratio. I just wanted to point out that a 10x P/E for GPT might seem cheap as you indicated in your post, but what is this relative to? My assumption was that you are making it relative to the rest of the market. I just wanted to point out that revaluation gains can significantly boost earnings for REITs and institutional investors tend to look through this. Hence the true P/E that the sophisticated investors refer to is the price on GPT's operating earnings.You mentioned in your post that GPT states a Realised Operating Income number - this is the operating earnings I am talking about. On last year's number, the P/E is ~15x which is where instos tend to see GPT being priced relative to other stocks in the market.

The CGT components you see on your distribution statement are part of the realised gains which GPT has made during the period. The revaluation gain number in GPT's P&L will include these gains as well as unrealised gains as part of their general revaluation process. Generally if there is a one off profit on sale that is distributed, investors will not value these highly as they are not recurring in nature. In GPT's case, they decided to distribute the profits on the sale of an asset but keep other "ordinary course" profits so their overall payout ratio didn't increase to a level which wouldn't be sustained. Therefore, people are comfortable that their level of dividend is recurring and won't drop just because of a one off asset sale (ie it can be replaced with "ordinary course" income next year). Long story short, GPT would have paid the same dividend regardless of the profit on sale of the asset, which is why the market is happy to value it.

2. The earnings growth outlook. When it comes to REITs larger investors aren't generally concerned about earnings just one year out. Given the leases on the properties are long, there is a high degree of transparency around the future earnings prospects. The risk to GPT's growth profile which people are concerned about at present is whether they can keep the 5-6% EPS growth that they will hit this year up, going forward into future years. I suspect the low volumes we are seeing at the moment are typical of the absence of instos being willing to step up and by a stock trading at 15x earnings which may only grow 2-3% per annum over the longer term.

Sorry if my post was taken the wrong way. I was just trying to give some of my thoughts on the point you made regarding GPT's seemingly low P/E (and the fact that I don't think that is how the larger players in the market view the P/E) and also provide some insight in relation to your point at the end of the post regarding the fact that offshore investors would find GPT compelling soon (by outlining the concerns around earnings growth).

One final comment on GPT's stated operating earnings (ROI). This measure actually excludes a large coupon payment they make each year to GIC (Singapore Pension Fund) due to a hybrid they issued to GIC during the GFC. That coupon payment is quite large from memory and so a lot of investors take this into account as well due to it being a recurring payment. It is a bit cheeky on the part of GPT because it is like excluding part of your interest expense when determining your earnings number! GPT's payout ratio is 80% of ROI, but significantly higher based on actual operating earnings once the GIC hybrid coupon is taken into account.

Hope this clarifies my post a bit and sorry if it was not clear to begin with. I am not a big fan of GPT management myself, but that does not necessarily determine the price action. As always, the data is dissected many different ways and differing views is what makes a market!

 

[nulla nulla]

........Part of my work role is to speak regularly to the large institutional investors in the A-REIT space.......

This would indicate that you may work for one of the A-REIT's or are a broker, unless of course you are like me and you phone the REIT "Investor Relations Managers" from time to time when you have a question, which they are usually happy to answer where it doesn't provide insider information (no matter how stupid I might sound).

1. The P/E ratio. I just wanted to point out that a 10x P/E for GPT might seem cheap as you indicated in your post, but what is this relative to? ....... On last year's number, the P/E is ~15x which is where instos tend to see GPT being priced relative to other stocks in the market..

The P/E figures quoted by me are relative to other A-REIT's (as per the weekly table I post in the A-REIT thread). Notwithstanding that there can be a difference between "Earnings" interpretaion (A-REIT v's non A-REIT's) that can be perceived to contribute to understating the P/E ratio, if the ratios were adjusted to the lower ROI figures increasing the P/E ratios, the A-REIT shares (in my opinion) would still compare favourably with other non A-REIT shares paying similar yields.

2. The earnings growth outlook. When it comes to REITs larger investors aren't generally concerned about earnings just one year out. Given the leases on the properties are long, there is a high degree of transparency around the future earnings prospects. The risk to GPT's growth profile which people are concerned about at present is whether they can keep the 5-6% EPS growth that they will hit this year up, going forward into future years. I suspect the low volumes we are seeing at the moment are typical of the absence of instos being willing to step up and by a stock trading at 15x earnings which may only grow 2-3% per annum over the longer term..

If institutional investor are looking for growth of 5-6% year after year, in a period when inflation is less then 3%, the world economies are contracted, unemployment is struggling to stay below 6% (even with the jiggling by both political parties as to the definition of "employmeny") and the only companies gouging huge profits are the banks, then in my opinion they are being unrealistic. Whether GPT has a P/E of 10:1 or 15:1 atm is relevent only in comparison of other shares when taken into consideration along with, distributions, yield, nta and share price to nta discounts. I personally believe that on this basis, with their current low debt levels, A-REIT's are a more secure investment for investors than many of the non A-REIT share in the ASX200.

One final comment on GPT's stated operating earnings (ROI). This measure actually excludes a large coupon payment they make each year to GIC (Singapore Pension Fund) due to a hybrid they issued to GIC during the GFC. That coupon payment is quite large from memory and so a lot of investors take this into account as well due to it being a recurring payment. It is a bit cheeky on the part of GPT because it is like excluding part of your interest expense when determining your earnings number! GPT's payout ratio is 80% of ROI, but significantly higher based on actual operating earnings once the GIC hybrid coupon is taken into account.

While I will make some enquiries in respect of how the "coupon" is treated, I suspect that there would be little difference to normal security holders as to whether it was accounted for/expensed in a manner similar to a recurring bond interest cost (expence) or as a distribution relative to a preference security/share holding. From memory Sydney Airport has/had a similar approach which was to the benefit of security holders in reducing tax.

I really think we are belaboring the point in this exchange as to the contextual relevence of P/E in the tables I post. As previously stated, I am not a financial adviser, my posts are not financial advice, I recommend to everyone to "Do Your Own Research". I am but a humble investor/trader trying to profit from understanding the moods swings that guide the market and cause the price of shares (in the A-REIT sector in this instance) to go up or down.

Cheers.

 

[coolcup]

Notwithstanding that there can be a difference between "Earnings" interpretaion (A-REIT v's non A-REIT's) that can be perceived to contribute to understating the P/E ratio, if the ratios were adjusted to the lower ROI figures increasing the P/E ratios, the A-REIT shares (in my opinion) would still compare favourably with other non A-REIT shares paying similar yields.

I agree, perhaps just not as favourably.

If institutional investor are looking for growth of 5-6% year after year, in a period when inflation is less then 3%, the world economies are contracted, unemployment is struggling to stay below 6% (even with the jiggling by both political parties as to the definition of "employmeny") and the only companies gouging huge profits are the banks, then in my opinion they are being unrealistic.

Totally agree. Only point I would make is that the company is saying they will target 5-6% year on year. The believability (if that is a word) of that is what the instos are questioning, just as you have.

Whether GPT has a P/E of 10:1 or 15:1 atm is relevent only in comparison of other shares when taken into consideration along with, distributions, yield, nta and share price to nta discounts.

Could not agree more. It is only relevant as a comparable measure.

While I will make some enquiries in respect of how the "coupon" is treated, I suspect that there would be little difference to normal security holders as to whether it was accounted for/expensed in a manner similar to a recurring bond interest cost (expence) or as a distribution relative to a preference security/share holding. From memory Sydney Airport has/had a similar approach which was to the benefit of security holders in reducing tax.

Maybe I did not explain my point clearly. What I am saying is that GPT do not take the outflow from the hybrid into account in their ROI number at all. Let's compare two A-REITs: ALZ and GPT. Both have hybrids which require coupons to be paid. ALZ's operating earnings number includes the expensing of the hybrid coupon. GPT's operating earnings number does not. So in effect, GPT is saying its earnings are higher, when in fact they need to pay the coupon on the hybrid prior to paying distributions to securityholders. In other words, it is not an apples for apples comparison between ALZ and GPT to look at their operating earnings numbers. But, since you look at total earnings including revaluation gains from the annual report, I think you should be fine.

I really think we are belaboring the point in this exchange as to the contextual relevence of P/E in the tables I post.

I apologise for belaboring the point. I did not reflect on the tables that you post and have no issue with them. I just saw in your post that you said GPT trades on a P/E of 10x and wanted to explain why I don't think the market actually values them at 10x but more like 15x. As you say though, that is still a fair bit cheaper than a large number of industrial stocks which are far more exposed to the general economy than GPT is.

I think we are on the same page. I did not mean to criticise you or your analysis. I was just trying to provide some additional insights. I won't reply to any of your A-REIT posts in future since I am obviously coming across too critically.

All the best.

 

[skc]

I apologise for belaboring the point. I did not reflect on the tables that you post and have no issue with them. I just saw in your post that you said GPT trades on a P/E of 10x and wanted to explain why I don't think the market actually values them at 10x but more like 15x. As you say though, that is still a fair bit cheaper than a large number of industrial stocks which are far more exposed to the general economy than GPT is.

I think we are on the same page. I did not mean to criticise you or your analysis. I was just trying to provide some additional insights. I won't reply to any of your A-REIT posts in future since I am obviously coming across too critically.

Stop being so apologetic... both of you! Great discussion by you two and I appreciate the views from both of you. The REITs have relatively weak of late and I think it's probably to do with the market now basically seeing past the bottom of the rate cycle. The $A falling also doesn't help, and I am not sure the upcoming reporting season will bring much positive catalysts either (perhaps some in the residential space). There doesn't seem a great deal of top line growth beyond inflation, so total return of 10-12% might be hard to achieve despite the dividends of ~6% accounting for half of that.

As a substitute to bank deposit, the REITs are probably not terrible for a retail holder. But as an equity investment it may not be as attractive as other industrial or financial stocks.

 

[nulla nulla]

I did not mean to criticise you or your analysis. I was just trying to provide some additional insights. I won't reply to any of your A-REIT posts in future since I am obviously coming across too critically.

All the best.

You are a big boy now, don't be so sensitive to robust discusion.

Criticism is fine when it is constructive and substantiated. Australia is still a democracy and we have fredom of the press and freedom of speech. Anyone is entitled to comment in respect of my posts regardless of the thread.

It is called discussion/contribution whether it is in agreement or oposition. Otherwise the threads would be a boring monologue. Can't have that. The whole idea of the threads is to get constructive input from as many members as possible. How else would I have learned that J.P.Morgan were recommending GPT a while back (before the price fell).

Oh and the price fell even further today. The RBA decision is out tomorrow and the share rpice may fall even further if there is a further drop in the Aud$. All good, GPT will eventually bounce (IMO).

Cheers.

As always, do your own research and good luck.

 

[nulla nulla]

.......The RBA decision is out tomorrow and the share price may fall even further if there is a further drop in the Aud$. All good, GPT will eventually bounce (IMO).

Cheers.

As always, do your own research and good luck.

The RBA interest rate decision came out, a further rate cut of 25pts....and GPT bounced 4.5% with good turnover. Eventually came sooner than I expected???? I wonder if they will get a speeding ticket?

Go figure, do your own research and good luck.

 

[coolcup]

In terms of what institutional investors are worried about, well the biggest concern is really how GPT manages to hit its long term earnings growth target of CPI + 2-3%. This implies ~5-6% earnings growth. The nature of the underlying assets provide longer term fixed rental growth of 3-4% which means there is a gap to bridge to get them to their 5-6% target. Management have been achieving this in recent history by buying their shares back accretively (which is getting harder given their P/E is much higher); cutting overheads (again limited in scope); cancelling out of the money hedges (which delivers an IRR of ~3.5% but boosts accounting earnings significantly). Now that this easy fruit has been taken, the question is how they will drive higher than CPI growth going forward. Also in an environment where retail tenants are flexing their muscles and demanding lower rents with GPT's portfolio exposed ~50% to retail from memory.

Having read the majority of the broker research following GPT's interim result today, the key theme coming out of the research echoes the views I expressed earlier, extracted in the quote above. Namely, GPT management have admitted that hitting their earnings growth target of CPI +1% growth in FY14 will be a challenge. Particularly given comparable rental growth in their office and retail portfolios is close to zero and the low hanging fruit has been picked off.

 

[nulla nulla]

Having read the majority of the broker research following GPT's interim result today, the key theme coming out of the research echoes the views I expressed earlier, extracted in the quote above. Namely, GPT management have admitted that hitting their earnings growth target of CPI +1% growth in FY14 will be a challenge. Particularly given comparable rental growth in their office and retail portfolios is close to zero and the low hanging fruit has been picked off.

It will be interesting to see whether the market likes the $0.05c div and pushes the price up today/tomorrow before GPT goes exdiv on Thursday or whether the cautious outlook for growth of cpi+1% going forward is seen as a negative and the market sells GPT down.

No doubt GPT will drop by at least $0.05 on Thursday/Friday after it goes ex-div. Realistically, to be delivering growth and improved distribution in the current economic environment, GPT is still outperforming many other A-REIT shares as well as shares in other sectors.

As always, do your own research and good luck.

 

[nulla nulla]

The Three year chart for GPT shows the steady climb of the share price as the market (herd) continued to warm to the strengths of GPT's Board & Management and the consistancy of their results. No doubt the improving yield helped as well. A retrace (falls in the Aud$ v's the US$) followed buy a surge (the foreign yield chasers using low interest borrowings) followed by another retrace (further falls in the Aud$ versus the US$) another surge (dead cat bounce) then a steady fall. A head and shoulder pattern if ever there was one. Left shoulder higher than the right shoulder and the nay-sayers in the herd start running arround screaming "the sky is falling, sell sell".



The Half Yearly report has plenty of good news but the analysts tend to overlook the "what a great job we've done" aspects and focus on the "batten the hatches, difficult conditions ahead" aspects. Rats start deserting the ship, not having the mental capacity to consider that the directors and management might have the ability and skills to guide the ship through the stormy weather to safe harbours ahead. The share price falls further and tests the previous support levels of $3.54.

The figures speak for themselves:

Share:	GPT
Date:	27-Sep-13
Closing Price	3.52
Issued Shares	1,694,888,368
Capital	5,966,007,055
Earnings $	0.3360
ROE	9.55%
Dist $	0.198
Yield %	5.63%
P/E	10.48
NTA $	3.73
Discount to NTA	5.63%

How many time have we heard that "the market is never wrong"? Yet, obviously, from time to time the market does get it wrong and then corrects itself. Or is this simply the smart money pushing the market down so they can acumulate before pushing it back up again? The RSI chart suggests that the share price of GPT is slightly oversold:



The MACD chart shows that GPT share price is moving in a tight downward spread and the converging and diverging gaps are tighter than normal (the multiple moving averages chart is to scary to show here, children would have nightmares and grown men could weep):



And yet, the comparative chart for the last twelve months with SGP (who once aspired to take over GPT) shows that SGP has resurged in the present conditions while GPT has been abandoned, why?



GPT has a NTA of $3.76, their debt gearing of 19.9% is one of the lowest of all the A-REIT's if not the lowest. One of the leading brokers suggested in June of this year that GPT had a target price of $4.33. Yet GPT has fallen 15% from their recent high of $4.16 (hit $4.20 interday) to $3.52. The Aud$ has fallen roughly 13% from the April level of US$1.06 to the current level arround US$0.94. This smacks of an over-reaction or something working behind the scenes.

To me it simply doesn't ring true. When GPT was making a play for Australand it was the darling of the A-REIT's. Not only did the share price of Australand (ALZ) go up but so did GPT. When GPT announced that they would not pursue ALZ both share prices dipped but not that much to be worried about. Curiously when Dexus made a play for the management rights of CPA (and was rumoured to be trying to finance a buyout scrip/cash offer for CPA) the share price of GPT seemed to slump even more. This despite the head honcho of GPT reminding the market that GPT has a war chest of $2 billion plus available. This with a gearing of only 19.5%! At this point I feel that I am out of synch with the rest of the market. I see GPT as having the capacity to swallow Dexus (DXS) and Commonwealth Offices (CPA) then divest the less desirable assets to other A-REIT investors such as the Singapore Superanuation Fund or the Canadian Teachers Superanuation Fund etc etc.

Then again, what would I know, mind you if I worked for one of the big merchant banks, this is the sort of deal I would be trying to stitch together. The fees (bonus) would be fantastic and the long term winners would be the share holders all around. As always do your own research and good luck.

 

[nulla nulla]

The 18 Month Chart for GPT shows that the share price is back where it was a year ago (give or take a few cents). The $3.54 support line was well and truly breached yesterday with GPT closing the day on $3.48. Interestingly the daily volumes on the sell down haven't been high suggesting that the sell down is probably related to the global hiccups brought on by the uncertainty of the US quantative easing combining with the very present political stoush in the US Congress between the Democrats and Republicans in respect of the US debt ceiling. It is likely that when this is resolved some confidence will return to the markets (hopefully including GPT).



The folowing chart is the Multiple Moving Averages as at yesterdays close (the one I didn't post on the weekend for fear of scaring children etc). The finger spread across all averages suggests that GPT has not yet reached it's turning point and may have further to go. Yesterdays outcome could have been a Capitulation point where the smart money came in and started to buy. However the volumes don't make this look likely. As allways do your own reasearch and good luck.

 

[nulla nulla]

It is about time we heard from the management of GPT. It is all very well to have really low debt gearing, high occupancy and to have a war chest of $2 billion plus, but it is pointless if no-one knows what they intend to do with it and where the management and board see GPT going in the future.



Todays announcement was well received by the market, even if volumes were still relatively low. It will be interesting to see if there is any flow on from tomorrows press coverage. As always do your own research and good luck.

 

[coolcup]

It is about time we heard from the management of GPT. It is all very well to have really low debt gearing, high occupancy and to have a war chest of $2 billion plus, but it is pointless if no-one knows what they intend to do with it and where the management and board see GPT going in the future.

View attachment 54980

Todays announcement was well received by the market, even if volumes were still relatively low. It will be interesting to see if there is any flow on from tomorrows press coverage. As always do your own research and good luck.

Hi nulla nulla

I have noticed a few other REITs heavily weighted to retail beginning to show positive signs and charts similar to GPT (eg WRT and CFX). Do you think there is a shift in sentiment towards retail driving this? I wonder how sustainable this is...

 

[nulla nulla]

Hi nulla nulla

I have noticed a few other REITs heavily weighted to retail beginning to show positive signs and charts similar to GPT (eg WRT and CFX). Do you think there is a shift in sentiment towards retail driving this? I wonder how sustainable this is...

I find it a little perplexing with retail based A-REIT's at the moment. Industry and the media has been talking up slow improvement in retail sales for some time but the market pushed A-REIt's with retail exposure down (CFX, GPT, SGP & WRT) and appears to have pretty much kept the sector down since with only modest improvement.

I consider these share were pushed down below intrinsic value and welcomed the trade opportunities in the rebounds from being oversold. Ones like SCP in the low $1.50's was hard to overlook although the volumes are lowish and the rebound slow, it is now back to $1.58 - $1.60. WRT was a no brainer from $2.91 to $3.10. and CFX very inviting anytime it dipped to $2.01 or lower (although CFX has a tighter spread and ergo more risk with the capital levels required to take a quick trade). SGP took off earlier than the rest, rebounding on their exposure to residential which is back in demand.

GPT seems to be lagging and in my opinion is way overdue for a bounce, even if only to keep it in line with the likes of SGP, WRT and CFX. As always everyone should do their own research. Good luck

 

[nulla nulla]

GPT continues to lag the rest of the A-REIT market. Lately it seems to have a resistance level arround $3.74 - $3.75. When it challanged $3.76 early this week I started to get hopefull it might be the start of a run up to $3.80+. Unfortunately it fell back to sub $3.70 and I picked up another parcel at $3.68 for an overnight trade up to $3.73.



I'm starting to get concerned that the market is losing faith with the GPT Management and Board. Recent announcements about their strategy and acquisition plans have failed to provide any sustained lift in investor interest, volume of share turnover, share price improvement etc. It seems generating good returns and having one of lowest gearing ratios, if not the lowest, is not enough for the market. Seems the market wants to see growth (like Dexus) even if it means pushing the gearing ratios up to 35% plus. In my opinion GPT is way over due for a good bounce but it just doesn't seem to be happening. As always do your own research and good luck.

 

[coolcup]

I'm starting to get concerned that the market is losing faith with the GPT Management and Board.

As mentioned in an earlier post, investors are concerned about GPT's earnings growth prospects. They have targeted CPI+1% through the cycle in earlier announcements which they dropped at their recent strategy review. All the low hanging fruit is gone: they have cut costs, broken hedges and bought back stock. There are not many easy pickings for them now and they have failed spectacularly at a number of large scale acquisitions (Australand, APPF Industrial and CPA) meaning even driving growth through acquisition looks difficult.

 

[nulla nulla]

Looks like GPT may not miss out on scooping up CPA after all. GPT today announced a superior scrip and cash take-over offer for CPA of $1.272 per share trumping the bid of $1.205 offered by Dexus. Will Dexus up the anti?

 

[laurie]

We don't need to get into a bidding war!