Originally Posted by
winner69
My mate shareguy posted this elsewhere .... may as well let it go viral lol
Seems KPG most exposed (although just OK) on adjusted property valuations and gearing covenants - surwly not a dilutive cap raise on cards
Here's what shareguy posted -
Craig's recent report says
Implied revaluations impact on gearing
As property values begin to incorporate the rate hike cycle, there is a risk that decreasing valuations may lead to an LPV breaching its gearing covenant ratios. Such a breach may force an LPV to raise equity at dilutive prices
At current asset valuations the NZ LPV sector has an average committed gearing of 32.8%, which rises +8.3% to an average of 41.1% according to Adjusted Premium implied revaluations. We note the following:
With the exception of NZL, none of the NZ LPVs would breach their gearing covenant on a committed basis should property values close to what the Adjusted Premium implies. However, as highlighted before, recent data for NZ dairy land is supportive of current valuations and we view the discount NZL trades to NTA as a function of it being in the early stage of its growth rather than investors view on dairy land revaluations.
On a committed basis GMT and PFI would experience the smallest increase in gearing of +5.9% and 5.6%. This is unsurprising given they have some of the smaller Adjusted Premium implied downwards revaluations.
PCT and VHP have the next lowest increases in committed gearing of +7.2% and +7.0% respectively. In our PCT calculations we have included the $114m development of 117 Pakenham Street which, although an uncommitted opportunity, is experiencing a level of leasing enquiry PCT described as 'encouraging'. We therefore view it will likely commence.
Excluding ARG/IPL/KPG/SPG are implied to experience the greatest increase in committed gearing levels of +8.1%/+9.4%/+10.3%/+12.0%. Pleasingly, should their gearing increase to the point Adjusted Premium implied downwards revaluations suggest, they will still be within their covenants with ARG/IPL/KPG/SPG having headroom of 9%/23%/5%/2%.