KPG - Kiwi Property Group Limited

[blackcap]

A yeild of 8.5% calculated on a heavily depressed share price of 82c that is...(6.8c p/share). Not complaining.

I got in at 81.5 and 81 the other day. The yield like you say is astounding and there is plenty of room for Capital Gain.

[bull....]

Super interested on whether this eventuates, hopefully we get an update during earnings.

For context, if KPG sold Vero centre and used the proceeds to pay down debt, then the KPG gearing ratio would fall in the ballpark of 1000 basis points, from ~35% to ~25%.

Alternatively they could maintain the current gearing ratio and instead implement a large capital return by way of a one off special dividend or a large buyback program.

Or another option is they simply sit on the cash for the moment safe in the knowledge that they have plenty of cash for future Drury stage 2 development, or for the big LynnMall mixed use development, or for BTR 2 & 3 at sylvia park - all of which are currently planned for later in the decade.

would a sale mean div 's would be reduced ?

[LaserEyeKiwi]

would a sale mean div 's would be reduced ?

Depends on what they would do exactly with the proceeds.

Vero generates ~$25m Net operating income annually, which is about 14% of KPG total (excluding asset sales).

If they collect $450m cash from a sale and use that all to reduce debt, at their current 5.5% average cost of debt that would save ~$25m in interest costs.

So under that scenario it is a straight wash - they lose $25m in net rental income, but they also reduce annual interest paid by the same amount.

In the short to medium term, the two latest asset completions at sylvia park of 3 Te Kehu way (medical services focused office tower) & BTR 1 will generate annual net rental income approaching $20m once fully occupied, which will offset the bulk of any loss of Vero net income, albeit not for another 12-24 months.

KPG intends dividend payout ratio between 90-100% of AFFO, and it was 92% of AFFO in the first half of this year, so a bit of a buffer there as well.

There are other options though, including returning it to shareholders as a special dividend either partly or fully (maximum of 28c per share if all $450m is returned to shareholders) or as a share buyback perhaps. I think they would probably want to keep gearing ratio in current band at least or lower, so wouldn’t expect it all to be returned to shareholders.

If it happens, a cash windfall of ~$450m for a company with a current market cap of $1.28 billion that is trading over 31% below its NTA provides a lot of intriguing possibilities.

[bull....]

Depends on what they would do exactly with the proceeds.

Vero generates ~$25m Net operating income annually, which is about 14% of KPG total (excluding asset sales).

If they collect $450m cash from a sale and use that all to reduce debt, at their current 5.5% average cost of debt that would save ~$25m in interest costs.

So under that scenario it is a straight wash - they lose $25m in net rental income, but they also reduce annual interest paid by the same amount.

In the short to medium term, the two latest asset completions at sylvia park of 3 Te Kehu way (medical services focused office tower) & BTR 1 will generate annual net rental income approaching $20m once fully occupied, which will offset the bulk of any loss of Vero net income, albeit not for another 12-24 months.

KPG intends to payout between 90-100% of AFFO, and it was 92% of AFFO in the first half of this year, so a bit of a buffer there as well.

There are other options though, including returning it to shareholders as a special dividend either partly or fully (maximum of 28c per share if all $450m is returned to shareholders) or as a share buyback perhaps.

If it happens, a cash windfall of ~$450m for a company with a current market cap of $1.28 billion that is trading over 31% below its NTA provides a lot of intriguing possibilities.

cheers , debt reduction would be prudent hopefully

[SailorRob]

Saw someone post about incredibly attractive yield so I took a look... 8% is hardly incredible, but the old 100 second look and we can see some problems

They struggle to do 100 mil from ops even though they have expanded the balance sheet a lot, pay out 72 and then find another 200 from somewhere to but more crap with.

Whats the point?

This company doesn't make much money - pays most out and borrows more but doesn't make any more cash.

Nothing attractive here, like all this other crap, net income way higher than cash just from BS revalues.

Looks like a 7.5% real cash return with any reinvestment coming from debt. You're paying 1.3 billion for a goose that struggles to lay 100 mil and uses plenty of debt to do so.

Not road kill but like most of the NZX a massive yawn from me.

Anyone wants some cash on BRK vs this through 2034 holler

[Sideshow Bob]

Liquidate. NTA at $1.17.

[blackcap]

Liquidate. NTA at $1.17.

Yes, if trading at large discounts to NTA, the most prudent option the board has is to liquidate and return funds to shareholders.

Unless of course the NTA is a figment...

[Snoopy]

Yes, if trading at large discounts to NTA, the most prudent option the board has is to liquidate and return funds to shareholders.

Unless of course the NTA is a figment...

......which it is from a unit holder investment perspective. It doesn't matter if the NTA is accurate from a building cost replacement perspective, if investors are not prepared to swallow the low return on assets that the rent streams based on those 'fully valued assets' imply. Such assets are set to be 'forever discounted' from a listed sharemarket perspective.

SNOOPY

[SailorRob]

......which it is from a unit holder investment perspective. It doesn't matter if the NTA is accurate from a building cost replacement perspective, if investors are not prepared to swallow the low return on assets that the rent streams based on those 'fully valued assets' imply. Such assets are set to be 'forever discounted' from a listed sharemarket perspective.

SNOOPY

Correct.

This is where I agree 100% with your use of LT3000 hong kong property write up.

[blackcap]

......which it is from a unit holder investment perspective. It doesn't matter if the NTA is accurate from a building cost replacement perspective, if investors are not prepared to swallow the low return on assets that the rent streams based on those 'fully valued assets' imply. Such assets are set to be 'forever discounted' from a listed sharemarket perspective.

SNOOPY

Well its not a building cost replacement NTA is it. It is the current market valuation NTA and thus my question to Directors. Why are you not liquidating and returning funds to shareholders. Or is the market valuation not accurate? And if so, why have the auditors not queried these valuations?