RRT - Record Realty

[Rainmaker2000]

Does anyone want to sum up the business they are in, the nature of their assets, profit drivers........it does not sound worthwhile talking about dividend yield if all these guys do is flip assets around and do property 'development'......but if they have recurring cashflows, I could understand the worth of the div yield more...

 

[Ken]

I have got no idea.

But my theory is that these sorts of stocks are only worth getting if you want it as an income.

If it is viewed as a higher risk term deposit with a 5 year view then shareholders should be rewarded.

The maths is as follows. If dividend is kepth the same which is currently 15.7% then the following is the returns over 5, 10, 15, 20, and 30 years.

All hypothetical..

$10,000 invested turns into

5 years = $21k
10 years = $47.5k
15 years = $103k
20 years = 226k
30 years = $1.077 million dollars.
40 years = $3.4 million dollars
50 years = $14 million dollars.
100 years = $21.5 million dollars

I know thats pretty extreme, but shows the value of compounding.

If we decide to add $5000 per year into the stock in a perfect world we still retain the 15.7 % dividend, then the following occurs.

5 years = $60k
10 years = $160k
15 years = $380k
20 years = $828k
30 years = $3.6 million
40 years = $15 million
50 years = $68 million
100 years = $100 million dollars!

hehe bit extreme and unlikely to happen as there are far to many variables with dividends being re-invested, and other events. But maths it all sounds pretty straight forward.

 

[prawn_86]

Like rainmaker, i would want a solid business description before investing.

At this stage my signature says it all

 

[Rainmaker2000]

I got to hand it too ya Ken, you are the king of hands free investing...

I'm sure we all love 15% dividends.....gees, if I could guarantee the yeild, I'd be on much better terms with my friendly neighbourhood margin lender who seems irate with my current 20% lvr.......hell, my margin lender would probably come over to my house, threaten to bust my knee caps with a ball pein hammer unless I helped them to cut out the middle man so the lender could bath in 15% fully franked yields instead of the current market rates they offer me to multiply their money....and this is comsec I'm speaking of

The reason why I have 20% lvr is not cause I'm unfamiliar with the 'buy' function on the Comsec website, it's because finding above average returns entails risk, smarts and analysis....

For example, any company consistently paying 15% yeld must either be:

a) On a PE of about 6 (assuming full payout of earnings which remain constant)

b) Consistently increasing earnings

While possible in theory, neither of these scenarios seem possible in practice..........The fact is earnings do not remain constant and ironically, many companies require earnings reinvestment just to maintain earnings or to grow year after year.........ironically, the companies that are able to pay 15% yields choose to reinvest profits anyway to become growth stories

 

[56gsa]

In the current environment it may be a possibility that investors are overly cautious regarding risk within the LPTs. Of course one has to weigh upside/downside risk.

Upside - RRT has an immediate upside of a possible 11cent div. which at current SP is a whopping 17%. (announcement this confirmed record date for 2 x 5.5c payments 12 march / 24 june).
RRT funds these generous distributions thru regular revaluations of its properties and sales as well. Thus the distribution could be under threat if current valuations (due to be released in Feb08) are less than ideal or the sale of a Mt Gravatt property does nto come thru.

Downside - Worst case is of course you loose your investment. But is this likely? Is it another Centro? The announcement below would seem to suggest the debt to be renegotiated in next 3 years is only $90m (5.4% x 1.678bn) + $165m short-term facility expires July09. So not talking billions and remember RRT has Allco backing to source debt.


Has the market overdone things on this one??

Record Realty (ASX: RRT) confirms long term debt funding position for
its portfolio
In response to current market conditions, Record Funds Management Limited
as Responsible Entity for Record Realty (RRT) confirms the current debt across
the assets of the RRT portfolio is funded for an average weighted term of four
and a half years. Further, only four of the forty assets representing 5.4% of the
total asset level debt, have debt that will expire on or before April 2010.
Further details of asset level debt in each jurisdiction and on a portfolio basis
are set out below:
Jurisdiction / Debt amount (A$) / Weighted average term / Weighted average
interest rate
Australia 574.5m 3.79 7.18%
Germany 494.2m* 4.14 4.90%
US 609.3m* 5.48 6.57%
Portfolio 1,678.0m 4.51 6.29%
*Assumes exchange rates of A$/Euro 0.596 and A$/US$0.86 respectively
The asset level debt is secured against the relevant property or property pool
depending on the jurisdiction. As at 30 June, 2007 the total asset value of the
property portfolio was A$2,301.0 million.
The RRT model is underpinned by government or premium corporates on long
term leases. The weighted average lease expiry on assets contained in the
total asset pool is approximately 8.5 years.
Record Realty’s corporate senior debt facility of $165 million has a current
expiry of July 2009. The facility at 30 November 2007 was drawn to $143.6m.
Foreign exchange hedging position
Record Realty has also locked in the following equity hedges on its overseas
investments:
•50% of initial US equity investment is hedged for 5 years at less than 72.0
cents, compared with the initial equity contribution of 80.3 cents;
•100% of the German equity investment is hedged for approximately 3 years
at approximately 56 Euro cents, compared with the initial equity contribution
at 59.5 Euro cents.
The debt for both the US and German portfolios have a natural hedge in place
as the debt for both of these portfolios is domestically domiciled.
Record Realty will announce its half year results to 31 December, 2007 on 21
February, 2008, at which time it will provide further details on its financial
position.

 

[56gsa]

OUCH ... the ccp virus has spread - RRT haven't sold the building and have foregone the interim divvie... so got crunched today down from 60c to 33c...

But consider what the last years been like for Mr JA Kinghorn ... correct me if I'm wrong but wasn't he the guy who floated RAMS before the crunch and got out with a lot less than what he could've made... well he's been putting some of that spare cash from selling RAMS into buying up RRT (and Allco too I think)... His 38m shares in RRT fell $10m today... wonder what's for dinner tonight at the Kinghorn family mansion?

 

[Rainmaker2000]

Wow, that's absolutely brutal........I'll have to take a look......surely not paying a dividend is a positive thing for a company in this climate........less leverage at least buys time to offload assets above net tangible value

 

[56gsa]

OUCH x 2... The saga of JA Kinghorn gets worse... For all those that have an implicit belief that those-in-the-know 'know' this will spin your mind.

JA Kinghorn is founder of Allco which owns RRT (property trust). JA is looking to place his proceeds from RAMS somewhere and has chosen RRT.

On 13th Feb JA decides to invest another $4.5m in RRT (along with the approx $20m in there already)
On 14th Feb RRT announces no interim div and stock dives 50%...

what do you do? your $25m invest is now worth $13m... another way you could have waited a month and bought twice the number of shares you own now for the same investment

Maybe JA should have phoned his RRT friends? maybe they aren't talking now...??