ALZ 0.00% $4.46 australand property group

capitaland strengthens balance sheet

  1. 2ic
    3,050 Posts.
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    Capitaland 3rd quarter results an interesting read.

    http://www.capitaland.com/en/files/CLpresentationslides3Q08.pdf

    Net debt down S$2B, gearing down to 51% with 4.5 years average debt maturity. Most importantly for them and thus ALZ if required, net cash up to S$4.2B. This does not mean Capitaland is a great business in the current market but at least no credit roll-over squeeze and enough cash to keep the wolves from the door.

    Preso states that Australia is in the 3 core regions for continued focus and growth, ditching Middle East and other growth options previously dabbled with. This IMHO reinforces Capitalands commitment to the $1.6B of equity tied up in ALZ using it as a continued vehicle for REIT investment in Oz. Too pregnant not to deliver this baby from trouble now.

    ALZ looks to be struggling judging by the huge drop in 3rd quarter revenue from the "Others" catagory; ALZ bit of NZ and corportate with ALZ being vastly the lions share. This would come as no suprise to anyone following the business I'm sure. The drop in revenue is so severe I am thinking they may need to top up once to see the CMBS roll-over done next year. My calcs show they have just enough credit line to pay back the $563M CMBS in June 09 and capitalise the $250-$300M C&I developments coming into the investment trust currently underway. Not enough retail sales to provide breathing space between then and now for mine.

    Further, MGR looks like an exact relica of ALZ but times 2. Twice the NTA, market cap, debt etc with exactly the same gearing levels and broadly same split between Oz C&I Development, Investment Trust and Retail Development business units as ALZ. Yet they have found the need to go back for more cash omly a week after dismissing the suggestion of raising more capital (typical lying bastards). MGR is a ASX200 member and therefore more liquid and desirable, likely to trade at a lower discount than ALZ to NTA for these reasons. Where MGR go I suggest ALZ will follow because it operates in exactly the same market with exactly the same cash flow and gearing (except average time to maturity for debt is less for ALZ).

    I will be watching MGR with interest and the size of their capital raising because they will NOT want to come back again in 6-12 months for another bite of the cherry. If the rumours are right and MGR are looking for $300M then it says ALZ will be looking for another $150M. MGR have syndicated bank debt to roll over 08 I believe and so needed to act now and strengthen negotiating position. ALZ probably have the luxury of waiting until later this year or early next until jumping in if required. Probably done in conjunction with FY08 results like they did at half yearly, especially if the market has bounced and share price rallied at all from this low.

    Anyway, still wouldn't be buying ALZ even though yield looks appealing and shares could double or at least 50% up in short time if market rallys a bit. HArd to see shares rally though with no sales no revenue coming in the door. Holders no doubt waiting for first homeowners to move on new blocks with baited breath. Holders of AAZPB also looking for some opositive news to steady the ship.

    goodluck
 
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