City Pacific CIY

[major]

Hi Bulle,
I'm not so sure if under the new accounting standards CIY can actually book the CPK sale as a profit.
I think that was the reason they couldn't book the last sale. Maybe they can if they still retain part of the business?

If the profit forecast does include profits from the sale, then that will be a really poor result for 07.

Anyway, I see the sell down of CPK as a means to get CPK's debt off their balance sheet.
This allows them to have a much cleaner, healthier and easier to understand balance sheet(more acceptable to instos and brokers), but also could allow CIY to borrow themselves for their own projects without blowing the balance sheet.

While they are losing a portion of the profits from CPK, I think it will be better for both in the long run. Much tidier and less confusion when reporting.

I think we all thought it would go the other way and CIY would buy back the rest of CPK- rather than sell down.

[soulman]

Those PR at CIY are either cunning or gullible. At all times, they should state operating profit but there were no mention. Reading it again, the CPK profits are certainly included in the forecast. Like I say before, trying to tidy up before they report a flat operating result.

Even ASIC should look at that announcement and ask them to clarify. They probably think that booking CPK profits is not one-off and are part of their operating result as CIY still have 30% of CPK to splash around in the next few years.

There is not much of these Mortgage Trust left after Bridgecorp yesterday. Australian Heritage Group? Have they gone under.

[major]

Fair enough Bulle. Then that will be a pisz poor result then.

Soulman, I think CIY PR fit both of your descriptions.

I gave CIY a bit of a pasting on the MFI thread recently, maybe I should have done it on here because I don't think CIY read the MFI thread!

[tone]

Do they really need the cash to pay out a dividend? I don't think so - they use underwritten dividend payouts, meaning the dividend payouts come from effectively watering down the remaining shares of everyone else. The real issue is appearing to make a profit, and appearing to reduce their debt.

[abucus]

New June 2007 Martha Cove Photoes.

http://www.cp1.com.au/martha_cove_photos

[abucus]

Should be an interesting week with CIY and possibly CP1 both reporting.
Any speculation on the MFS talks and the likely assets and plans involved ?

[major]

Kiwi, where the bloody hell are ya?

Final acknowledgement soon as to the eventual winner of the long running MFS/CIY debate that kept this thread lively in days gone by.

[abucus]

Looks like you're still a chance Major. :o)

[major]

Might be Abucs, but I wouldn't put any money on my chances, yet!

Kiwi the bast ard must have retired on his MFS profits! Is it true they are running the ruler over MBL since it pulled back?


I have noticed you like CPK Abucs, it has just floated through all this crap/correction like it never happened!

[soulman]

Wow, MFS has fallen so deep that they are now heading below CIY.

In this world, sometimes you time your purchase wrong, btw, I have so many to list recently but you do get out of jail in some of the sell you do. Bought MFS for $5.80 about a month ago, watched it go to $5.50 and rebound back to $5.80 - $6. Sold at $5.85 (20th Jul). Also, sold APA just about 2 weeks ago and now freefalling.

These are the great sell that give you some comfort but nevertheless, the portfolio is not looking healthy as I have 2 investment bank shares in there and many others DEEP in the red.

One shares that look bullet proof in this environment, WAN. I noticed it actually went up yesterday and today as well.

[abucus]

Hi Major,

yeah, i like CPK but i would have preferred if they had announced a higher dividend ratio payout, it's currently at around 50%. Also the 49% sale of Paradise Resort gaining $10 million sounds like another one of the CIY management's massaging of profits.

Still, if Grocon has borrowed the money from City Pacific at 8% to buy in, there needs to be a bottom line dividend of 6.4c per share just to pay back the interest on the loan.
That equates to a dividend percentage currently of 9.1%, which is not a bad bottom line figure. And Grocon should be keen to not only pay back the interest, but to own the underlying shares as well, and then to start making money from them, hopefully, lots of it.
As usual, it COULD be really good. :o)

Hi Soulman,

I know how you feel. A couple of weeks ago i finally decided to get in bed with the banks and bought some Westpac, Suncorp and ANZ. :o(
I saw the further carnage yesterday and moved some more money to the account one day late ! They've all recovered again from yesterday.

I'm really glad though to have paid off the margin loan a couple of months ago.

You both keep mentioning MFS, so i'll take a look at it as well in the next week or so.

[abucus]

http://www.investortv.com/video/34782,386-18061,47561.html

[bullebak]

Time to buy again?

[spruik]

Reading CIY's response to the ASX concerning a story in The Australian today, is there really some doubt about their ability to pay the upcoming dividend?

Please refer news item on CIY today (28/08/07).


Cash at Hand
“With $25 million in cash, of which $23.2 million is referred to as “securitised cash”, City Pacific may have to pull a rabbit out of its hat if it is going to fund a $45.2 million dividend payment due on October 31.”

CIY response:
The article correctly states that City Pacific has $25 million in cash and notes that City Pacific has a dividend obligation of $45.2 million. As a financial services entity, City Pacific continually invests its cash in order to generate profits. City Pacific confirms it will pay its dividend from cash generated in the ordinary course of its operations on the 31st of October 2007.

[soulman]

That's why I steer clear from CIY. From previous article, I would assume they will take some money from their funds management and put them back when they acquire sufficient cash. Or they will borrow from banks to funds their dividend, which is not a good thing as dividend should be fund from existing cash flows.

I would view CIY as a dangerous investment that would not lure me just because of their high div yield. The high dividend yield is there for a reason. Everybody knows it for a long time now but no one is buying up because CIY is extremely dangerous. If CIY is sound and attractive to fund manager, I am sure their share price will be more like $7. Even MFS stay away.

[abucus]

Hi Soulman.

I guess it was a blessing in disguise that MFS stayed away.
Now CIY are picking over the bones of the best parts of the MFS carcass.
I guess it shows how dangerously close to the wind these property financing companies fly.

It makes your comment about high dividend yields compared to risk very clear.

Regards.

[soulman]

Abucs, the only loser here is me. Instead of trusting CIY management, I bought into MFS and the rest is history. CIY should survive because of their property development arm and that they are more conservative and have 3 times less shares on issued that MFS. MFS has been buying coy with scrips and it shows.

The fall from grace of MFS is quick and sudden. One day they were $4 and the next, zero.

Just think of Chris Scott of S8. He was robbed, although I am sure he is still well off. Read about his anger and that he wanted to stop the sale of Stella. He said he could have come up with the funds neccesary for MFS short term debt and that Stella for sold for a song.

[mark100]

I think CIY's business model is going to come under extreme pressure simply because of all the losses suffered by other similar companies. I would imagine it will be very hard to retain FUM especially when the MFS name gets mentioned along with CIY.

But I will say it again - Phil Sullivan has been a developer all his life through many economic cycles. I would trust him to assess lending on a property development more than 2 lawyers running MFS or a clerk at a major bank.

However I have much less faith in CIY's ability to assess a price for an acquisition.

Haven't heard from kiwi lately. He was always pretty good at sticking the knife into these 'cowboys'

[major]

Hi Abucs, what are your views on CPK currently? Do you think they are sufficiently insulated from CIY - just in case the latter is in a bit of bother? Grocon adds a little security too now.

I think CIY's high div payout ratio has haunted them through their whole public life. Maybe the high payout was a means of Phil getting a good payback over the years, I don't know but in hindsight it was bad management to constantly pay out virtually all profits.

I agree Mark100, CIY has stuffed up virtually all their acquisitions by overpaying for dud businesses, can they do it right this time considering they have the upper hand in any dealings with MFS now.

BTW Abucs, I notice CPK have not offered any 1/2 year guidance, other than from last year- in which they expect 08's result to equal 07's.

[abucus]

Hi major,

i'm sure you guys know more about this than me, but my 2c worth is ......
CP1 is still reliant on CIY for funding and has debts of about $200 million as of EFY 07.
CP1 had $132 million receivables as of the same time. I've recently been told that $40 million has so far been received (as of a few weeks ago) and the rest (of the 132) is expected to be received in the next 12 months.
Together with other received income from this years profits, the money will go to pay off debt.
If CIY was to do a MFS tomorrow then CP1 would probably have enough assets to cover the debts in a fire sale with not much left over.
Grocon have not paid 1c of their own money for CP1 but taken out a loan from CIY for the purchase and the CP1 shares are the only collatoral. So if CIY goes belly-up then Grocon could simply walk away.
I guess the fear of CIY falling is why CP1 shares are so low. It will take another 18 months in my opinion for CP1 to pay off it's debts and start to acquire assets to make it truely independant of CIY.
In short, if CIY prospers for the next 3 or 4 years, CP1 will make lots of money, if not, then there's nothing else to support the company at the moment.
The CP1 structure of CIY and Grocon sounds very good if both parties prosper.
Grocon by wanting two members on the board and an independant company name and CEO sound like they are serious about CP1's future but have wisely left themselves free to walk away if CIY go pear shaped - which of course i hope will not be the case.
Regards.

P.S. First half results for CP1 have recently been losses followed by strong second half year results - and i am expect something similar this year.

[major]

Hi Abucs,
many thanks for that info. I haven't taken much notice of CIY and CPK for a while so your info was a big help.

[abucus]

CIY and CPK half year profits just announced.

[winner69]

If you believe this story in the aussie press its a wonder the CIY shareprice hasn't collapsed .... esp as they use words like brazen etc

Bit of a worry with $27m profit but negative cash flow of $20m


City Pacific bids for survival


http://business.smh.com.au/city-pacific-bids-for-survival/20080222-1txg.html

[mark100]

The CIY accounts were a mess in my view. If you just read the presentation you might feel a bit optimistic but looking into the accounts reveals a cash flow squeeze.

This time last year CIY raised $85m. Its all gone. Operating cash flow for FY07 was massively negative and so was cash flow this half. I'll speculate that the delay in the settlement of Mariners Cove on the Gold Coast is because of cash flow problems.

A few years back CIY was a debt free cash generating business. CPK was supposed to be the development company. Now CIY is playing around with large property development / acqusitions which require lots of cash to service the debt. But when you pay 100% out in dividends things can get tight, especially when some of the reported earnings are revaluation gains and paper shuffling like they were in FY07.

CPK was also a worry. Most of the profit came from financial income. But they have a large net debt position so where did the financial income come from??

I wouldn't touch either with a bargepole anymore, not even for a quick trade

[soulman]

The CIY accounts were a mess in my view. If you just read the presentation you might feel a bit optimistic but looking into the accounts reveals a cash flow squeeze.

This time last year CIY raised $85m. Its all gone. Operating cash flow for FY07 was massively negative and so was cash flow this half. I'll speculate that the delay in the settlement of Mariners Cove on the Gold Coast is because of cash flow problems.

A few years back CIY was a debt free cash generating business. CPK was supposed to be the development company. Now CIY is playing around with large property development / acqusitions which require lots of cash to service the debt. But when you pay 100% out in dividends things can get tight, especially when some of the reported earnings are revaluation gains and paper shuffling like they were in FY07.

CPK was also a worry. Most of the profit came from financial income. But they have a large net debt position so where did the financial income come from??

I wouldn't touch either with a bargepole anymore, not even for a quick trade

Mark, it seems you dodge a lot of bullets in this market environment.

I remember you were a former RCD investor and both CIY and CPK. Did you trade MFS at all?

How did you manage to get out and was it because you tooth comb those financial statement. I never tooth comb financial statement. I more rely on the market reaction, headline figures and outlook statement. Not a good strategy but I did put a white flag on CIY a few years back. Instead, I went on to make the same deadly sins by investing in MFS and also not selling AFG. I was only in AFG because I was in RCD before their merger.

[mark100]

Then the result came out and it was terrible in my view. I sold out at $4.65 and won’t be back until I see some changes in the financials and profit contributors (which might be never).



Hi soulman yes you could say I have dodged some bullets but I do go through every page of the accounts and check trends etc. However some is by good luck. In the first 6 months of last year I moved from being 120% invested to 30% in the stockmarket because I was a bit too busy with other things to trade the market plus some other reasons. I remain 25-30% invested at this point in time.

[abucus]

Sounds like a good position to be in Mark.
I envy you.
Are there any stocks that excite you in this current climate ?
Any industries ? Anything in property ? Leighton Holdings ?

[mark100]

I've still lost plenty abucs but thankful for getting out of some of the stocks I did own as I have always been a fan of financials and they have been smashed recently.

In this years sharetrader comp I picked BOW, FPS, FGE, SHG and SAV from memory. I hold each of these 5 and still like their prospects. Also recently started a thread on SXE which looks ok. I also posted some of my thoughts on SHG recently.

I also think BTT and KBC are very cheap but unlikely to turn around quickly due to horrible sentiment in their sectors.

[winner69]

CIY half year announcement today'

Would you want to be holding before hand?

In this environment I wouldn't .... only one way the share price can go I fear

[tone]

I used to own a significant amount of CIY shares, then sold them to buy another house. When the stockmarket crashed, I bought a small amount again around the same time as the directors bought up, at a cheaper price than the directors. I was happy until the bad news about the balance sheet came out - not so much because of the balance sheet itself but because of the perception of what it means. As soon as I heard the news, I immediately got back out at $2.70, making a small profit. Looks like it was the right decision. If buying on today's price, the return is potentially a massive 20% fully franked, but the company must survive to receive that. I have seen asset rich, cash poor companies fail in the past. In fact, I'm propping a private one up at the moment. The one I am propping up has 6 months to sell some assets before it will need another cash injection. I hope CIY survive, I really do. But I'm not prepared to invest in them at the moment given my other commitments. If I had no commitments, perhaps I'd invest a small amount, but it would be money that I would have to be prepared to lose. Having that much debt is a massive liability, and if it wasn't for my current experience, I would have probably still been in there.

[mark100]

I hope they survive as well. Phil is a nice guy. But all this bad publicity is causing investors to withdraw from the mortgage fund which appears to be causing a liquidity squeeze.

[tone]

Yea, it's almost as though the media are willing it to fail. Hang in there people, all will work out if you support it.

[spruik]

Weird to see this one trading at 1.33... (have none)

Looks like ppl think it will go belly-up.

[mark100]

In the notes to the latest set of accounts it says the mortgage fund had drawn its debt facility for longer than was permitted. A newly negotiated facility has to be paid down in full by May 31. Some rumors in the market that CBA is going to move in on the fund.

[spruik]

In the notes to the latest set of accounts it says the mortgage fund had drawn its debt facility for longer than was permitted. A newly negotiated facility has to be paid down in full by May 31. Some rumors in the market that CBA is going to move in on the fund.

93 cents... geeezzz

If that does, what value would remain?

[winner69]

CIY half year announcement today'

Would you want to be holding before hand?

In this environment I wouldn't .... only one way the share price can go I fear

Well the inevitable happened .... not many can produce a different set of accounts a week apart and get away with it ..... and so many questions .... looks like nobody believes anything now ..... but no doubt some do and can't understand why

[soulman]

Tough times for CIY shareholders.

I am sure most of you here got out of CIY before this because you all have hindsight into what happen to MFS, AFG, CNP etc...etc...

After the halt, CIY won't be looking too flash.

[spruik]

At least they did something right - halted trading. Although it could have been done earlier, it was apparent in early trading.

[abucus]

CIY's announcement to pay down debt now belatedly released.

Good, bad, indifferent ?

Where to from here for Phil and the boys ???

Importantly, will it be enough to keep funds in the MT when the rules on redemptions are relaxed ??

[The Big Ease]

id like to know if this institutional investor is mandated to manage any of my super.

[abucus]

Fortress Credit.

[spruik]

Who believes CIY will survive and in what form? Haven't done any homework myself lately, but it's kind of looking cheap enough maybe for a punt... (29 cents).

[Technical.Trader]

http://img235.imageshack.us/img235/8284/ciyvz6.jpg (http://imageshack.us)
http://img235.imageshack.us/img235/8284/ciyvz6.b6a75a0fd7.jpg (http://g.imageshack.us/g.php?h=235&i=ciyvz6.jpg)


Cycle just turned to positive on CIY.. It is also at a seasonal low point... If I were to trade this I would look to Buy on stop using a trigger entry during any decent rally during the week, ...and managing risk with the use of a stop loss if the stock went lower after entry.

[abucus]

- "will CIY survive ?"

hi Spruik, that does seem to be the big question.

It seems to have enough assets but is dependant on investors in the Mortgage Trust not all 'rushing for the exit door' when the redemption ban is lifted.

Perhaps the ban will be extended another 6 months ?
A drop in Fed interest rates sometime in the next 6 months would go a long way to helping it.

i see CIY is making many more market announcements these days which helps with transparency. Shame that it only decided to do so under extreme duress.