WDC - Westfield Group

[oldblue]

Agree. Plenty of much more profitable stocks than WDC.
But for some unfathomable reason it - along with QBE - always seems to get included in basic portfolios.

Probably because of a general perception of these stocks as "best of class" in their respective sectors and offering steady growth at relatively low risk.

I don't hold either, although I watchlist QBE, but I can see the appeal for many investors.

 

[nulla nulla]

Recent trading suggests the share price for wdc is climbing in a sideways and upward channel. However on Friday wdc opened above the upper channel marker and took of steadily through the day.
This price increase was at odds with the rest of the market and in the abscence of any fantastic news I can only magine that some of the resource stock holders see security in wdc, with its' yield on present price levels, as being safer than resources exposed to the Henry Tax reviews.
Unfortunately a review of previous spikes shows that it retraces again savagely after a few days as profit takers lock in their gains.

 

[Tysonboss1]

http://vimeo.com/12047088

http://vimeo.com/12047088

Above is a great video Westfiled has put together for their 50 year aniversary.

The video is high quality so you will have to pause and down load for a good 10 mins or so.

 

[drsmith]

http://www.theaustralian.com.au/bus...ustralian-assets/story-e6frg9gx-1225946809564

I wonder what they will call it. Westfield Trust the 2'nd ?

The announcement when it comes out will make for facinating reading.

EDIT: Westfield Retail does sound better than Westfield Trust the 2'nd.

 

[ROE]

Probably split the development arm from the landlord arms and have two listed companies

1. Westfield Construction.
2. Westfield Retail.

 

[Tysonboss1]

Probably split the development arm from the landlord arms and have two listed companies

1. Westfield Construction.
2. Westfield Retail.

From my understanding the new trust "westfield retail" is going to take 50% of the ownership of westfield groups Australian and newzealand properties.

This will leave westfield group with the remaining 50% of australian and newzealand properties + the usa properties + UK properties + management rights + development operations.

 

[nawshus]

Is the SP value of WDC going to go down because of this? since 50% of au/nz retail is going towards it.

 

[Tysonboss1]

Is the SP value of WDC going to go down because of this? since 50% of au/nz retail is going towards it.

Yes, in theory it should drop by about $2.75. But investors total value of investment should stay about the same because they will be given a share in the new trust worth about $2.75. So rather than owning i wdc share at circa $13. they will own 1 wdc share worth circa $10.25 + 1 new trust share circa $2.75.

By my calculations WDC should be trading some where close to $10.44 after the deal is done. But who knows what the market will value it at. It may trade on a higher earnings multiple if investors consider the increased return on equity to be worth extra.

 

[shinobi346]

From my understanding the new trust "westfield retail" is going to take 50% of the ownership of westfield groups Australian and newzealand properties.

This will leave westfield group with the remaining 50% of australian and newzealand properties + the usa properties + UK properties + management rights + development operations.

I can't figure out why they are splitting the AU and NZ properties among 2 shares. Why not have one pure overseas play and one local?

This split is bringing back memories to me of Centro where they had a retail and property fund. Fogetting what happen ed to them, I would be keen to have some shopping centre shares in my portfolio again.

5:29 in the video - that brings back memories of Toombuls old glory days and the iconic T sign - I can't believe the council allowed them to take it down. For a long time Toombul was heaps more popular and bigger than Chermside. How times change.

 

[skc]

I haven't come across any analyst report that detail exactly what shareholder value is created by splitting. There is probably a slight PE benefit to the Westfield group given that they are no longer tied to the property holdings (or not as much of it anyway). But the typical A-REIT on the market is trading below NTA... so I really don't know how the market will value the 2 new entities, and whether the existing shareholders are better off.

Also, the public can actually buy into Westfield retail trust as an IPO. This is most unusual, did they not think that there will be enough existing holders buying into the capital raising? Although WDC does have the brand recognition to attract some money from the pulic.

Has anyone seen a good article analysing the situation?

5:29 in the video - that brings back memories of Toombuls old glory days and the iconic T sign - I can't believe the council allowed them to take it down. For a long time Toombul was heaps more popular and bigger than Chermside. How times change.

I was driving pass Toombul and had the exact same thought... it was the place to be on Brisbane's North back in the days. Haven't been there for 5 years at least.

 

[drsmith]

I'd suggest the primary purpose of this is to raise capital and that it was felt that a vehicle that did not have exposure to the US/UK markets would be more attractive to local investors. The Lowy's like to develop and debt financing is less of an option now than it was in 2004.

Of further interest is an extension of the trading halt pending the release of an announcement by the group.

An extension to bed this down or something else ?

 

[skc]

Article from the Australian...

http://www.theaustralian.com.au/bus...westfield-empire/story-e6frg9gx-1225947507404

Fund managers and analysts told The Australian it was a sophisticated capital rearranging exercise, offering "marginal benefits" to investors. "They are not buying or selling any assets. But they are shifting capital from one vehicle to another and in the process incurring $200 million in costs," said fund manager Winston Sammut of Maxim Asset Management.

A substantial investor said: "The benefit to unitholders is marginal. We will be offered entry into a business offering low a return on equity. This deal is not a company-making deal. It is just a way of getting another capital partner for the group."

The expressed purpose of the split is to close the gap in value between Westfield Group and its peers, which are trading at higher multiples. But investors remained uncertain that Westfield would be able to achieve this.

An analyst said: "To me this is step one. There will be more moves involving other parts of the business. Otherwise, why would it go through all this trouble for something that is not that compelling?"

Others raised the question of why the group would go through the trouble of the 2004 merger of the three trusts to create a large group -- only to unravel it in 2010.

$200m in fees is a good 10c per share...

 

[Mitsimonsta]

A 'pure local play' is very enticing, the business here is doing extremely well and is very profitable. The US and UK businesses are holding it back, whereas before the US was doing very well prior to the GFC.

I think it will open up some very interesting possibilities. WDT may eventually decide to raise it's stake in certain properties, which then liberates more cash for WDC to look for more opportunities. I would hope that in a few years that WDT would wholly own at least one property in each capital city.

The only 'stumble' here is that they have not spun enough of the local properties into the WDT vehicle. A 70/30 split in WDT's favour would have been a much more exciting deal. It would have left WDC as a less interesting thing to buy into though, with the UK and US businesses weighing so much.

I only hold $2.5K of WDC, so not a major for me. I am in favour of this proposal and will take up my shareholder entitlement of about 51 shares. Due to the 1:4.23 ratio, it's not exactly going to break the bank - less than $150. Would have much preferred to see a 1:2 offer to holders and a smaller public offer (or none at all). I still have some reservations about it, I can see that they are trying to do but I agree with the analysts that there is more restructure coming from WDC. The fact we had a second trading halt is proof of that - capraise for WDC also? Sale of assets overseas? Roll out 50% of the US and UK properties into another REIT? Buy Centro?

Still deciding if I want to take up the public offer. $2k min + $500 lots thereafter is a bit more than I wanted to. A $1K public offer guarantee for WDC holders would have been helpful.

 

[skc]

The punters have no idea which way this should go.

Opened $12.95, dropped to $12.7, pushed up to $13.08, had a low of $12.60 now hovering around $12.67.

That's basically the 10c per share bank fee coming out of the share price.

It still feels like a nothing sort of split with a cap raising thrown in without any real discount or benefits to existing holders.

 

[ParleVouFrancois]

SKC given that the current company is a combination of "growth" overseas assets and comparatively more safe and stable Australian and New Zealand assets, I can see exactly where the value comes into play. You now have the option of buying into the more income stream type Westfield Retail, which is going to be more stable debt wise etc, than the current Westfield Group.

Thus each company will appeal to different investors, in theory increasing the MC of the combined company compared to the previous structure. It's a bit of a stretch but I guess it works in theory, and I don't hold any shares so no worries from me personally. Obviously if you hold it'll be more of a major issue.

I agree there aren't many discounts or benefits to existing holders, but that's just the way the company has structured the deal.

 

[skc]

SKC given that the current company is a combination of "growth" overseas assets and comparatively more safe and stable Australian and New Zealand assets, I can see exactly where the value comes into play. You now have the option of buying into the more income stream type Westfield Retail, which is going to be more stable debt wise etc, than the current Westfield Group.

Thus each company will appeal to different investors, in theory increasing the MC of the combined company compared to the previous structure. It's a bit of a stretch but I guess it works in theory, and I don't hold any shares so no worries from me personally. Obviously if you hold it'll be more of a major issue.

I agree there aren't many discounts or benefits to existing holders, but that's just the way the company has structured the deal.

I know what the thoery says

Supposedly the market doesn't like conglomerates or companies that combine different businesses. Supposedly diversification is best undertaken by individual investors rather than company executives. And the market dislike that so much, that there is often a discount applied to those parts which would otherwise be valued higher if they are separate.

What I fail to see is a clear rationale behind the split in terms of value creation, given that we didn't know if, or by how much, the market was discounting WDC holding assets that require different leverage and ROE etc.

Based on comparable companies I'd say there wasn't much discount in WDC's share price, and hence there was nothing to "unlock" by splitting. The value lost however was obvious with all the fees to the banks and the additional CEO/board remunerations for the new trust.

We will soon find out what the combined share price for the two companies will be...

I actaully have a short position on WDC before it went into the halt so that's probably why I am slightly cynical...

 

[matthewl]

It's not looking good at the moment. WDC dropped again today to a low of 9.11.

What are your thoughts on this?

 

[Tysonboss1]

It's not looking good at the moment.QUOTE]

Thats a matter of opinion? I happen to prefer lower share prices. Infact I see stockmarket surges like we have been experiancing as an annoyance.

When deciding whether something looks good or not you should be looking at the underlying business itself, not the price action of the stock in isolation.

I would suggest that a business that is winning on multiple fronts with a depressed stock price looks very good,

 

[nulla nulla]

I know what the thoery says

Supposedly the market doesn't like conglomerates or companies that combine different businesses. Supposedly diversification is best undertaken by individual investors rather than company executives. And the market dislike that so much, that there is often a discount applied to those parts which would otherwise be valued higher if they are separate.

What I fail to see is a clear rationale behind the split in terms of value creation, given that we didn't know if, or by how much, the market was discounting WDC holding assets that require different leverage and ROE etc.

Based on comparable companies I'd say there wasn't much discount in WDC's share price, and hence there was nothing to "unlock" by splitting. The value lost however was obvious with all the fees to the banks and the additional CEO/board remunerations for the new trust.

We will soon find out what the combined share price for the two companies will be...

I actaully have a short position on WDC before it went into the halt so that's probably why I am slightly cynical...

I originally held Westfield America, then they joined all the units togeter and I ended up with WDC. I held them all the way up then all the way down. I finally sold them when they got into the rut between $11.00 and $13.00. Traded them a few times then let them go when I was relatively square.

Now that they have split I am watching them again for trade opportunities.

Personally I can't see how the argument for them to be sperated now is better than the argument for them to be joined years back. Sounds like a money spinner for the consultants.

 

[drsmith]

Personally I can't see how the argument for them to be sperated now is better than the argument for them to be joined years back. Sounds like a money spinner for the consultants.

They wanted to raise capital to fund their development pipeline and felt that a trust with purely Australian assets would be more attractive to Australian investors.

The consultants would be happier than the investors at present.