CER 0.00% 32.0¢ centro retail group

2010, page-10

  1. 5,487 Posts.
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    From June 2008 to June 2009, Aust property valuations decreased from $1.95b to $1.67b or 14.5% (pg 22 presentation. Pls check my spreadsheet too under Aust portfolio tab)

    During the same period, cap rate/yields blew out from 6.12% to 7.25%, which is a blow out of 15.6% (pg 22 presentation)

    In order to calculate a valuation of a property, two variables are required. These are NOI (Net Operating Income) and Cap rates

    In this instance we know the valuation and we know the cap rates used.

    If valuation = NOI / Cap rate, then we can say

    -14.5% = NOI / -15.6%

    NOI = positive 1.2%

    NOI forecast on a 12 month look forward basis has only increased by 1.2% from June 2009 to June 2008.

    My discussions with Centro at the AGM confirmed that the NOI part of the formula is calculated by forecasting NOI on a 12 month look forward basis.

    Yes, even if cap rates stay the same in Australia, then the NOI part of the equation should be bumped by 3% at a minimum to keep in line with the NOI growth the Australian portfolio has been experiencing so far in this financial year.

    Review of the Sep09 quarterly results show that Australian NOI in the Sep09 was 4% higher than the corresponding period in Sept08.


    In this regard, Aust property valuations should in theory increase by 3% even if cap rates remain the same.

    In my spreadsheet, I took a conservative stance and assumed no increase in property valuations in Australia.

    At the bottom of my Aust portfolio analysis, there is a sensitivity analysis. A 2.5% increase in Aust property valuations, will increase NTA by around $41m which is just under 2c per unit. A 2c increase in NTA would take NTA as at 31 Dec 09 from 38.3c to around 40c.

    Im going to stick with 38c just to be on the safe side :-)


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