CNP Centro

[winner69]

One of the first real casualties this part of the world of the credit crunch eh

Centro down 60% upon resumption of trading ..... thats $2 billion of shareholder value gone

Pretty bleak announcement really

All those overpriced shopping malls in the US ..... mountains of debt ..... and all the man can say “We never expected nor could reasonably anticipate that the sources of funding that have historically been available to us and many other companies would shut for business.

You would have to think more of this happening

[winner69]

... and listed property trusts were the 'safe' part of the market

[spruik]

... and listed property trusts were the 'safe' part of the market

This really p!sses me off. Don't have CNP but heavy on some others. Although I've done a little profitable trade (other than the long-term holdings) in GPT last time they hit sub $4.20.

But for CNP to not make a distribution this time is really sick and shows the extend of their over committment. There are many retirees who depend on property trust income.

Some years ago we have been warned with Trusts taking on debt. They should really not do so, all should be financed by unit holder's funds.

[winner69]

Spruik ... no doubt (with hndsight) many will will come out of the woodwork and say Centro was a disaster waiting to happen ..... highly leveraged purchases of shopping malls at even prices the Yanks weren't prepared to pay and all that sort of stuff

See now nearly 70% down

Not really tempted to pick the bottom and buy in yet .... no doubt more capital will be required soon? .... and asset sales maybe at distressed prices?

[spruik]

Looks tempting as a trade, but yes they'll have to do something drastic.

Might leave this thing alone. I prefer to trade those I am happy to hold (and sleep with) over time if it goes against me.

[winner69]

If Phaedrus was in this he would have been out at $8.50 at the end of July .... thats what the charts say .... the long term uptrend was over

Amazing that it wasn't that long ago Centro was about $10 ..... now $1.50

This is a disaster of monumental proportions and as spruik says guaranteed that many invested in this thinking property was safe and that a good income would be forthcoming each half year

An investment in Bridgecorp might have been better?

[winner69]

Well that day is over and Centro investors down more than $5 billion .... just today and thats on top of the billions they are already down this year ....... probably millions of individuals affected through their super plans and funds.

Centro Properties unable to refinance and unless able to by Feb insolvent .... Centro Retail Trust down 40%

No withdrawals from the Centro Diversified Funds either ..... wonder what that is worth now seeing a lot of the funds ended up Centro Properties

Centro will not survive ..... all credibilty gone ...... Macquarie or Westfield will be picking up some cheap assets here i guess

Lessons to be learnt ...... beware high debt and finacial engineering that is rife around the world these days

[soulman]

So beware of MacBank as well?

I was never into property trust although I do have the energy form of the trust like APA. That's not doing well either along with DUE, HDF, SPN and ENV.

Any CNP holder hit hard here in sharetrader?

[steve fleming]

... and listed property trusts were the 'safe' part of the market

part of the problem these days is that a lot of these stapled entities are referred to as "Listed Property Trusts" when that is the furtherest from the truth

LPTs these days involve funds management, syndication, property development, etc and have been priced accordingly....unfortunately for a lot of investors they may no longer suit their risk profile.

When previously an LPT would essentially track its NTA, these days you have entities like Goodman which was trading at a premium of 3 times its NTA which is crazy stuff - Goodman was down 26% today!

Westfield will defintiely be the one to watch - by far and away the worlds largest property trust and with the majority of its assets in the US.

And nice work UBS - became a sub. holder of Centro last week - hope those analysts get a nice Xmas bonus for that!

[_Michael]

And nice work UBS - became a sub. holder of Centro last week - hope those analysts get a nice Xmas bonus for that!

Yeah saw that - you'd think it would be a bummer of an xmas present eh!?

:rolleyes:

[Huang Chung]

It will be interesting to see where CNP heads today....Dow down 174 won't help the mood either. If investors take the view that CNP can be saved, we might even see some bargain hunters appear.

[qinshu]

A very big hit. May well have influenced the drop yesterday of the overall market. If they cannot get finance it is hard to see how they can recover, or why anyone would buy in. A lot of sympathy for any CENTRO holders.

[bermuda]

A very big hit. May well have influenced the drop yesterday of the overall market. If they cannot get finance it is hard to see how they can recover, or why anyone would buy in. A lot of sympathy for any CENTRO holders.

The UBS guys must be spewing.This is a big substantial hit which has huge implications right down the money line. The malls are going ok but there is no money to finance them...far out...this is awful..........and it is Christmas time.

Can the Aussie Govt help them out..or perhaps a Middle East Fund? Probably not.

[soulman]

Another RAMS in the offing. Freefall and no one want to pick them up.

If you pick up Centro or RAMS, you pick up their problems as well. Hence, RHG was never a takeover target, as it turned out. Trader bought yesterday are dying but if you short CNP yesterday, then you are laughing.

[Huang Chung]

It will be interesting to see where CNP heads today....Dow down 174 won't help the mood either. If investors take the view that CNP can be saved, we might even see some bargain hunters appear.

Well, I was half right. The bargain hunters were out in the afternoon scooping up shares that had been sold down to just over 40c early in the session. Still finished substantially lower than yesterday though.

Surely CNP will survive this by flogging assets to pay off debt. :confused:

[The Big Ease]

if you were a sovereign wealth fund, why wouldnt you be all over centro with a rescure package? buy a major stakein the company at 1/10th its peak, provide some loans to cover the exposure and you have yourself a decent set of properties.

sure you wouldnt be able to lend at the same rate as the market, but you would make it up with the capital appreciation from the stock price.

[POSSUM THE CAT]

Is this the first investment for the New WAM ACTIVE Fund

[bermuda]

Is this the first investment for the New WAM ACTIVE Fund

Where there's smoke there is fire and in this case naked flames.

Centro have been accused of using shareholder funds to inflate their shareprice.

If this is true then some people are going to get hung.

[_Michael]

I think this whole centro crisis has been blown out of proportion. My guess is a plan forward will be carved out by January and dividends will resume next year.

They can sell a few assets, issue a bit of equity through a joint venture type scenario thus lowering their gearing enough to get an extension of debt.

On Tuesday and Wednesday the stock turned over $600 million and price ranged from 50 cents to $1.50 - there were clear winners and losers on the day.

My take is that the winners were those who understand the business well and the defensive nature of most of their assets (mainly supermarkets with long leases) and just went in bigtime when they saw the units tank to 70% below NTA.

People in this camp were Colonial First State who already hold quite a lot, and perhaps other property trusts or banks who know the refinance will go ahead without the sky falling.

While most were sitting on the sidelines talking about how reckless the company had been and others were panicking franticly to sell - some just saw $2.30 for 50 cents!

[_Michael]

if you were a sovereign wealth fund, why wouldnt you be all over centro with a rescure package? buy a major stakein the company at 1/10th its peak, provide some loans to cover the exposure and you have yourself a decent set of properties.

sure you wouldnt be able to lend at the same rate as the market, but you would make it up with the capital appreciation from the stock price.

Precisely Big ease, the market sell down priced in the assets being good for nothing - but thats madness - people will still do their grocey shopping and Woolworths will still pay their rent! Its the most spectacular example of knee-jerk reaction i've ever seen - all interesting stuff though!

[winner69]

Precisely Big ease, the market sell down priced in the assets being good for nothing - but thats madness - people will still do their grocey shopping and Woolworths will still pay their rent! Its the most spectacular example of knee-jerk reaction i've ever seen - all interesting stuff though!

Hope you cashed in then Michael

You in for the long term or just a few quick trades?

[winner69]

Michael ... some of that NTA looks a bit dodgy ...... $120M plus in 'non recourse loans' to staff to make them rich .......... but not worth much now so prob need writing off sometime

Investors stare at $120m black hole
http://www.theaustralian.news.com.au/story/0,25197,22956214-643,00.html

[soulman]

Nice article Winner.

The selling does look overdone. I stayed away though. I thought this would be another RHG. The share price uplift since then was because the coy reassure investors that it can re-finance again early next year.

Big profits if you buy the second time round. Anyone here did a nice little or big trade on CNP?

[_Michael]

Yeah - interesting read Winner, was unaware there was shonky disclosure going on which no doubt makes the situation worse....


Still i think its important to seperate those issues from the economic value of the assets, for instance Berkshire Hathaway took a large position in Enron bonds during the depths of that debacle and they subsequently returned over 400% in the years after.


I just read todays announcement and it looks it Macquarie were the ones making their clients take a bath this week - closing out derivative positions as low as 44 cents....


Winner, in answer to your question i don't hold yet becuase i was too slow to react on the worst day of the melt down and have set myself a price target of below $1.00 - if i can buy there i will be a buyer and holder for long term yield and capital growth.

I say this on the basis of that being sufficient discount to assets to compensate for the risk, currently the cashflow yield is around 40% and they have quality sought-after assets in Australia that can be sold and will IMO give them room to move.

Not trying to ramp, more am jut fascinated much in the same way that World War II fascinates - humans being overtaken by emotion to behave in irrational extremes. While both are sad and troubling there are lessons for all...

[_Michael]

Another thing that strikes me as funny is that the loan for employee share purchase clause was created in 1991, that is 6 years before they even listed, has been public knowledge the entire time including listing prospectus - yet now due to the funding problem all of a sudden its front page material for The Australian!

[SectorSurfa]

dont they have far more exposure to the US real estate markets?

about 600% more?

[winner69]

I.......

.......and just went in bigtime when they saw the units tank to 70% below NTA.

People in this camp were Colonial First State who already hold quite a lot, and perhaps other property trusts or banks who know the refinance will go ahead without the sky falling.



Michael - isn't there some irony that while CBA were stitting on unsecured loans well in excess of $1.3 bllion wondering what was going on their investment arm was losing hundreds of millions of investors money .... and averaging down as you point out.

[_Michael]

SS, yes they have 60% US exposure (not empty houses, but supermarkets and bulk retailers who have contractual obligation to pay rent)

but..

the Australian assets would be sufficient to get them out of strife. Meanwhile the US assets will continue to generate cash for ongoing (long term) dividends to shareholders - those buying at current prices would most probably be looking at 20% dividend yield by FY09.

Winner - yes its all very ironic although i'm just speculating on banks involvement as i rally have no idea... but my basic logic leads me to think that banks are currently in the best position to understand the most probable outcomes as they are the creditors sitting opposite Centro at the negotiating table.

I assume their trading arms are only taking paper losses at the moment, but closing their clients out of positions who are leveraged (bummer if you're in that camp). Personally i think the cash-flow yield and the asset backing is just too strong for them to implode....

Still i might be wrong - judging by the crazy price volatility i guess nobody really knows!

[SectorSurfa]

60%, ok

I just thought I had read around 750 properties in US vs about 125 in Aussie.

[_Michael]

60%, ok

I just thought I had read around 750 properties in US vs about 125 in Aussie.

Sorry SS its actually 65% US not 60%

[_Michael]

more buyers and sellers reveal themselves today;

Barclays: SOLD 1%
CBA: SOLD 1%
UBS: BOUGHT 3%

[_Michael]

UBS averaging down no doubt

[winner69]

Way its going Michael you might get your sub $1 today or later in the week.

The big unknown and what a lot of people are trying to unravel is the complicated structure around the centro investments.

A lot of the assets are in direct investments funds (Centro get management fees) but most of the debt is in Centro Properties ..... the challenge for those trying to unravel it all is to get cash up the supply chain (as it is) to Centro Properties to keep the bankers happy.

On the +ve side the management contracts apparently could be capitalised at $5 billion .... that little bit of financial engineering could shore up the balance sheet

Interesting to see how it all unfolds

[winner69]

Michael .... plenty of favourable sentiment from those who invest others money still around ....... that $1 probably a good entry point? ..... esp if they average down more and support the shareprice

Loved some of the quotes in this story in the SMH

Before the collapse of the Centro shareprice ......APN Funds Management told clients it "watched in disbelief" how the security, with other trusts, was sold off "on sentiment rather than actual fundamentals".

and UBS "succumbing to short-term decisions based on the actions of others and uncertainty in other markets".

http://business.smh.com.au/centro-brings-other-property-funds-down/20080101-1jsi.html

[spruik]

I read those articles too over the week-end. Why some (so-called) "property trusts" invest in other property trusts is beyond me - other than for the purpose of milking the public.

(1) Real Property Trust (geared)
(2) Investment Funds or "Trusts" (themselves geared) owning (1)
(3) Retail Investor (gearing up to by shares/units) owning (2)

The bottom line here is that in this scenario only a fraction of the retail investor's own money is actually invested in property. Even without a subprime crisis it undermines the financial system and could (should really) collapse like a house made of playing cards when property is in a down cycle.

About time people came to their senses. I'd like to see the return of real ungeared property trusts.

[_Michael]

Winner,

Yeah thanks that is an interesting article, but e all know its got to be take with a grain of salt as all these guys needed to be backing their own horses in public eh! :-)

That said I did actually pick some up on Friday at $1.00.

My opinion (which might easily be wrong) is that Westfields recent media statement about not wanting to be in a position where they need to sell assets was great scare tactics - in reality they would be happy to pick up some Centro Assets in Australia.

For existing shareholders at $1.00 or below - it would take something drastic for them not to get their monehy back and then some in the next 12 - 24 months - even if some assets were sold at very deep discounts.

The only caveat or should i say the only catalyst i see to oblivion for CNP would be if there was something nasty hidden among their tangled and overlapping asset ownership structure - but I suspect their sturcture is probably less dodgy than that of Macquarie Bank...

[Huang Chung]

Up goes the 'for sale' sign.....

http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00800063

[_Michael]

This story is both interesting and entertaining, and due to the markets reaction to this news today its now also been quite profitable for me, after being the stock for only one day! To be honest i'm not going to laugh about it yet becuase I know the story is far from over and that the risks are still serious and real. I will be hanging for longer term whatever the outcome becuase i planned this more as a yield play, to generate cash flow to buy other stocks, as if things pan out ok then CNP could still have FY09 yield 20%+ and those types of opportunities seldom pop up. From capital perspective there is no real hurry - perhaps sell when the property cycle in the US eventually turns at some time in the distant future....

[winner69]

Up goes the 'for sale' sign.....

http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00800063

Yeah .... almost we have thought some things up .... but hey guys what do you think we should do

Might be one big bun fight eh

[_Michael]

This is going to be a big day for volume if you check out the frenzy out there at the moment (god its good not being at work when the markets open!)

Does anyone think perhaps there are some serious players buying today? Like someone genuinely interested in taking the company out or the like?

The markets been open for less than an hour and volume approaching $30 million, whats more half the brokers are probably still on holiday!

[winner69]

Winner,

That said I did actually pick some up on Friday at $1.00.


Good stuff eh Michael

[younga2]

Nice rise for CNP today.... had a look at the debt ratio- 56% compared to 36% back in 2006.... looking at going in in the next few days .... who else is having a punt?

[JBmurc]

IMHO CNP will get the funding oversold on FEAR worse case they sell some assets good buying for a short term bounce back over $2

-Got off SS---

CNP CENTRO PROPERTIES GROUP Overnight Price: $1.32
JP Morgan rates CNP as Overweight - Okay.
The broker has had a good look at the books and spoken to people in the market, and the bottom line is Centro can achieve the asset sales it needs to save the day. US$6.8bn should do it.

The redemption-frozen products will be canned however, in the broker's view. The broker now estimates NTA to be $1.78, but that doesn't include what should be another $1.30 for the services division. Overweight retained, but so is the VERY RISKY warning.

Target increased from $2.74 to $3.67.


Target price is $3.67 Current Price is $1.32 Difference:$2.35 - (brackets indicate current price is over target). If CNP meets the JP Morgan target it will return approximately 178% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June. JP Morgan forecasts a full year FY08 dividend of 18.00 cents and EPS of 32.70 cents. At the last closing share price the estimated dividend yield is 13.64%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 4.04.

[soulman]

Will have a look at CNP. I suspect a lot of day trading in CNP due to the volume. Or maybe someone is building a stake?

If it was a punt, it would be a small punt. Nice rise intraday but the close was down. Will see what happen tommorow.

[winner69]

Best of todays press ...... essentially saying that nobody knows .. which prompted this
(Quote) Merrill Lynch has put out a report valuing Centro as a going concern at between 26c and $2.03.

http://www.theaustralian.news.com.au/story/0,25197,22999529-5012439,00.html

[kura]

Thats a pretty wide variation W69 !

With current share price of approx $1, a punt now would look pretty sick if the 20 cent scenario comes to pass, though it wouldn't be so bad if the $2 scenario becomes reality.

Don't think I would be tempted to risk an 80 cent loss, just to make a dollar.

Compare this to the other casualty from the credit crunch, namely RHG, my numbers here come from the independent experts report on the sale of new lending operations to Westpac, namely a valuation between 30 cents and 70 cents. With a current price of 30 cents, you are essentially risking nothing, for the chance of doubling your money.

[JBmurc]

Blackstone, Citadel Are Among Suitors for Centro, Review Says
By Tim Smith

Jan. 2 (Bloomberg) -- Blackstone Group LP and Citadel Investment Group LLC are among potential suitors for Centro Properties Group, the Australian Financial Review reported, without saying where it got the information.

AMP Ltd. and listed property group DB RREEF Trust have also expressed interest in Centro, the Australian owner of 700 U.S. shopping malls that put itself up for sale yesterday ahead of a Feb. 15 deadline to refinance A$3.9 billion ($3.4 billion) of debt, the newspaper reported.

Centro shares closed yesterday at A$1.04, down from their record high of A$10.02 on May 7. The Melbourne-based company said Dec. 17 it may have to sell assets to pay debt, sparking an 86 percent two-day slump in its shares.

If Centro can fix its liquidity issues, the stock may be worth more than A$3 a share, the Review reported, citing an unidentified banker for the shopping mall owner.

[lakedaemonian]

With such a low market cap and so many properties(700+ mall & shopping centres across several continents), the average for each property owned and/or managed is incredibly low.

There must be some seriously big piles of steaming junk off the balance sheet.

As a small direct investor in commercial real estate I see the following issues:

*softening retail sales(most of CNP's properties are retail I presume?)

*softening commercial property valuations

*buyers market in commercial property

If I was running a sovereign wealth fund(especially China)..I'd consider buying in big.

Wouldn't CNP act as a hedge against inflation/deflation?

If the US inflates away it's problems wouldn't CNP act as a hedge against China's vast dollar holding since they are geared up to the hilt?

If the US deflates, CNP goes bust, but it's huge cash horde is king.....they then buy the scraps for pennies on the dollar.

As a small investor, I'm not so sure what the future holds for CNP, but for a deep, deep pockets soverieng fund isn't it a "no brainer" or am I missing something?

[Halebop]

As a small investor, I'm not so sure what the future holds for CNP, but for a deep, deep pockets soverieng fund isn't it a "no brainer" or am I missing something?

The shares are heavily discounted but the debt is not. With some $26b in assets supporting $18b in debt, a 30% equity margin at the top of the market is hardly a no brainer. The CNP "leveraged" growth business model relies upon 4 factors:

Investor inflows (not outflows) and acquisitions (not divestments)
Development margins to fatten fees
Low interest rates
Stable or (preferably) rising capital values

With confidence in their judgement at a low it will be difficult for them to maintain inflows. Worse still, they may have to reduce their existing fee income by divesting properties
With no available capital they will not earn development margin fees
With investors becoming less tolerant of risk the cost of capital has increased - interest rates must become more expensive even assuming they find someone to lend to them - so cash flows and returns will likely be impacted
Those interest rates also impact the capital values of fixed income assets like real estate. Worse still, like many foreign investors in the US they have misunderstood a basic tenet of the US property market: It is more cyclical and less forgiving than markets like Australia and those deceptively sweet high yields exist for rational reasons. We haven't yet even seen the cycle materially change other than a softening - so far just a hiccup in liquidity. Add a cyclical reversal on top and this company would be worth less than nothing.

Selling the management contracts to a better capitalised manager may generate the best outcome but I'm not certain this will be particularly positive for investors (probably why ML had such a wide valuation range). A sharp institutional investor may be able to negotiate a capital investment and debt write off combo but this would be even less likely to generate value for present investors - anyone coming in with their "good" money will be wanting to grab that margin.

[winner69]

Hi Halebop -- long time no hear

Missed your insights into what's happening

Good commentary on CNP - they do seem to have got themselves into the brown stuff haven't they ....... and what must be a worry is the head honcho admits he didn't see the credit crunch coming.

The board has some pretty powerful names on it as well ..... makes it even more surprising.

[Halebop]

Hi Halebop -- long time no hear

Missed your insights into what's happening

Good commentary on CNP - they do seem to have got themselves into the brown stuff haven't they ....... and what must be a worry is the head honcho admits he didn't see the credit crunch coming.

The board has some pretty powerful names on it as well ..... makes it even more surprising.

Hi W69,

Been taking time off 'cos this sharemarket has looked like going nowhere much for a while and I was feeling a bit share market fatigued. Still, my insight on CNP is pretty wise after the event huh? :p

I think there was plenty of media comment over the last 2 or 3 years about how property hybrids weren't really the property trusts of old. Investors had their chance to "derisk" at high prices but there is always that lure of a "new paradigm" (Another word for "Dumb Greed"?). I'm also reminded about how many fathers a successful idea has. CNP appears a veritable orphan on this forum. Were there really so few holders?

Glad you didn't listen to me about JBH or another $5 would have gone begging! Can I have a third go at calling the top on that one? :rolleyes:

[JBmurc]

By Nick Lucchinelli | January 03, 2008

BROKERS believe Centro Property Group will ride out its credit crunch woes and that its securities could rebound to within the $2 range.

The nation's second largest owner of shopping centres went into a tailspin midway through December when it was unable to refinance about $1.3 billion of maturing debt.

The company was nearly annihilated by investors, losing more than four-fifths of its market capitalisation.

Since then, Centro securities have stabilised around the $1 - $1.10 range and yesterday, it announced it had received unsolicited approaches form parties wishing to invest in the group or buy up some of its assets.

In response, Centro said it was open to offers that maximised the interests of its security holders.
Aequs Securities institutional dealer Ric Klusman said there was now a lot of chatter in the market about either financial institutions or rival shopping centre operators buying in.

"The rumour is that they are talking to Westfield,'' Mr Klusman said.

"Westfield sold them a lot of assets and whether Westfield wants to buy them back or not, I think they will now ride through this, this is different to the RAMS situation.''

At 1.36PM (AEDT) Centro Securities were up 6.5 cents, or 5.77 per cent, to $1.10 in a broadly weaker market.

That was fuelled partly by media reports that US hedge funds Blackstone and Citadel had flown teams to Australia to participate in the Centro sale.

Mr Klusman said he would be surprised if Centro's advisers, Lazard Carnegie Wylie, hadn't attracted the interest of such global finance giants.

"I think it's an opportunity for someone to raid them and my gut feeling is you're going to get a bid and the buyers are positioning to get themselves a good deal,'' he said.

"Carnegie Wylie are very professional advisers and I would think they'd be naturally talking to all these people as a matter of course.''

He also pointed to the huge volume of trade in Centro securities and said it would not be difficult for a potential suitor to quietly build up a significant stake in the company.

"About 10 cent of the company was traded yesterday, and if you went in gently over a week and soaked up 10 per cent and then said you'd lend them the money needed to cover the financing problems, you'd be pretty well placed,'' he said.

Mr Klusman predicted the stock will "go back to $2''.

[kura]

After yesterdays article, valuing the shares between 20 cents and $2, here is a reference to a value of exactly 97 cents !


Investors flee trusts even as Centro shares go for a run
Email Print Normal font Large font AdvertisementAdvertisementMiriam Steffens
January 4, 2008

INVESTORS continue to flee the listed property sector a day after Centro Properties Group raised the white flag and put up the "For Sale" signs in a desperate bid to escape its funding crisis.

Property shares slumped, including industry blue-chips like Westfield, Goodman Group and GPT, dragging the ASX 200 Property Trust Index down nearly 3 per cent.

Sentiment in the sector has been trashed amid concern the industry's aggressive expansion into offshore markets over the past years may be not have been without risk, hurting other trusts as well. Real estate trusts, traditionally regarded as safe-haven investments with stable returns, posted their first annual decline in seven years last year as the subprime mortgage market collapse in the US sparked a global credit crunch.

"There's a lot of punting going on with Centro, and hedge fund trades are dominant," a trader said. "But mums and dads have become nervous about the sector and are selling out."

Still, Centro was the only property trust with significant gains yesterday, surging 8c to $1.12, as some punters took a bet that the struggling shopping centre owner would be taken over, find white knights, or at least be able to sell its stakes in property funds to solve its credit woes. The stock had plummeted more than 80 per cent last month.

Centro's chief executive, Andrew Scott, and his adviser, Lazard Carnegie Wylie, have to come up with a rescue plan by February 15. They were busy talking up buyer interest this week, with one banker even claiming the stock could rise to more than $3.

Centro said it had received a "significant number of unsolicited expressions of interest" in the company and its assets from domestic and international parties.

"I'm not surprised; every man and his dog is going to sniff over the carpet to see what they can pick up," said an analyst. "There's millions of people coming through the airport, it's a pretty big firesale."

Ian Randall, an analyst at Deutsche Bank, continued to advise clients to sell Centro's shares, valuing them at 97c. There was "little to get excited about" in the company's latest statement, he said. The move just "formalises the sale of the entire group as one of the options under consideration".

While demand for the centres in Centro's Australian Wholesale Fund would be "reasonably strong", Mr Randall reckoned most buyers would also want to get the lucrative management rights for the assets cheaply. And the prices Centro could get for its US wholesale fund were likely to reflect the fact that it was a forced seller in a deteriorating market, he said.

The US private equity firm Blackstone, which manages the world's biggest buyout fund, and the Chicago hedge fund Citadel declined to confirm reports that they were looking to take stakes in the indebted company. Citadel spent billions last year gobbling up victims of the credit crunch.

Standard & Poor's slashed its credit rating for Centro NP, the US retail trust Centro bought last year for more than $4 billion, by six notches to CCC+, just five levels above default.

There was a "substantially increased" probability that creditors could put the trust into default as it may offload its centres in a softening US market, S&P said.

with wire services

[younga2]

Nice rise on Friday.. I expect it to drop back on Monday with the entire market, but there appears value in the share. From my brief look, the market cap is about 1 billion and net assets is over 3 billion. It will be interesting to see what deal goes on with CNP. Currently hold.

[steve fleming]

No comments on the two pieces of potentially very bad news released by CNP on Friday evening?

1. the CFO is now "on extended leave" for health reasons(?!), replaced by some guy who has no direct knowledge of the CNP operations...this is hardly going to please the banks in the middle of a funding crisis or help the "strategic review" - the CNP finance dept. must be in total disarray.

2. CNP admits is has failed to extend some expiring hedging contracts -the majority of CNP's borrowings are now subject to floating rates rather than fixed - increasing its exposure to changes in interest rates - given the RBA is going to increase the OCR next month, this is going to further increase the financial stress on CNP.

Given these developments, i'd imagine the secured lenders will really start to question their positions.

Also, when a company is in financial distress, any reference to "Net Assets" or NTA is effectively meaningless.

[younga2]

Thanks for that - i will be careful.

[winner69]

No comments on the two pieces of potentially very bad news released by CNP on Friday evening?

1. the CFO is now "on extended leave" for health reasons(?!), replaced by some guy who has no direct knowledge of the CNP operations...this is hardly going to please the banks in the middle of a funding crisis or help the "strategic review" - the CNP finance dept. must be in total disarray.

2. CNP admits is has failed to extend some expiring hedging contracts -the majority of CNP's borrowings are now subject to floating rates rather than fixed - increasing its exposure to changes in interest rates - given the RBA is going to increase the OCR next month, this is going to further increase the financial stress on CNP.

Given these developments, i'd imagine the secured lenders will really start to question their positions.

Also, when a company is in financial distress, any reference to "Net Assets" or NTA is effectively meaningless.

Yeah came out after the market had closed as well.

Seem to have lost the confidence of the bankers haven't they ... not good

The Australian had an article what to do when different announcements came out ... they did not mention this scenario ..... but did mention if one particular employee left then the game was over ........ the only decent employee they had it was suggested ..... wasn't the CFO though .... though losing the CFO is a big blow and having his job done by somebody from KPMG (who some are actually blaming for allowing Centro to get into this mess in the firat place) is the quick fix solution

This could be market moving news ....... Monday could be another interesting day

I am not convinced that this is a short or long term hold waiting for the recovery but having a bit of profitable fun over the holidays doing a bit of day trading. Holding overnight is a dangerous game in these circumstances ..... maybe this sort of announcement is one of the reasons why

[JBmurc]

ended up selling my postion for a 2k 10% profit not bad for 3days will be watching closely over the next couple weeks after reading some of the posts might have been a smart move.could really go either way once more is known will be back if better news is announced in the very short term.

[soulman]

Nice outs JB. It was stated by the media that those announcement by CNP was a profit warning. Nevertheless, if anyone was running a ruler over CNP and willing to pay a premium, then anything goes for CNP.

[soulman]

Took out my buy order, CNP open so low that it would have got filled and then CNP went for a recovery. Such is life......

[BRICKS]

WELL its the old story play with fire and one day you will get BURNED..

[_Michael]

No comments on the two pieces of potentially very bad news released by CNP on Friday evening?

1. the CFO is now "on extended leave" for health reasons(?!), replaced by some guy who has no direct knowledge of the CNP operations...this is hardly going to please the banks in the middle of a funding crisis or help the "strategic review" - the CNP finance dept. must be in total disarray.

2. CNP admits is has failed to extend some expiring hedging contracts -the majority of CNP's borrowings are now subject to floating rates rather than fixed - increasing its exposure to changes in interest rates - given the RBA is going to increase the OCR next month, this is going to further increase the financial stress on CNP.

Given these developments, i'd imagine the secured lenders will really start to question their positions.

Also, when a company is in financial distress, any reference to "Net Assets" or NTA is effectively meaningless.


Contrary to most - i personally don't think either of those things are going to be relevant to the final outcome, because my best guess is that someone with a stronger balance sheet will enter the picture before things get there.

With regards to CFO, my first thoughts were relief - he is best out of the picture and no doubt suffering psychologically on the back of the events that unfolded and wealth that was destroyed partially caused by his decisions.

At the end of the day, yes while its likely that the assets will be revised downward in valuation, by perhaps 20% or even as much as 25% - the buildings are not simply going to turn into dust and there is absolutely no reason the banks would aim to destroy equity holders if they could avoid it - as they are still significant equity holders as well....

[younga2]

I have to agree with you Michael.. I am still holding, and although the assets may be revalued down, i still believe there is value there.... I will be interested in their half year to see if they revlue the properties downwards and by how much.

[steve fleming]

WELL its the old story play with fire and one day you will get BURNED..

Sometimes you make a lot of sense BRICKS

People who think that CNP is a property owner are mistaken big time.

One only has to cast a quick eye over the balance sheet to see how little property CNP owns directly ( less than 5% of total assets).

CNP in FY07 generated the bulk of its revenue from its "property services" - ie property management. CNP has been borrowing to essentially buy FUM (ie property management income ) - not to buy properties.

CNP's property interests are held through a variety of listed, unlisted and other investment vehicles - ENTITIES WHICH ALL HAVE THEIR OWN DEBTS AND ASSOCIATED PROBLEMS.

CNP has little control over what happens in these investment vehicles - ie if the trusteees resolve to freeze redemptions in these funds as has happpened - leaving CNP's investments totally up in the air.

If people think they can find value amongst such complicated financial engineering, good luck to them - i, however, agree with BRICKS.

[younga2]

Regars Steve... i had thought they were property investors...if they are not property investors, then what have they been spending their money on?

[winner69]

Regars Steve... i had thought they were property investors...if they are not property investors, then what have they been spending their money on?

Read Steve's post again .... maybe a bit more slowly this time around .... and tehn ask yourself "Who actually owns the properties"

[winner69]

Sometimes you make a lot of sense BRICKS

People who think that CNP is a property owner are mistaken big time.

One only has to cast a quick eye over the balance sheet to see how little property CNP owns directly ( less than 5% of total assets).

CNP in FY07 generated the bulk of its revenue from its "property services" - ie property management. CNP has been borrowing to essentially buy FUM (ie property management income ) - not to buy properties.

CNP's property interests are held through a variety of listed, unlisted and other investment vehicles - ENTITIES WHICH ALL HAVE THEIR OWN DEBTS AND ASSOCIATED PROBLEMS.

CNP has little control over what happens in these investment vehicles - ie if the trusteees resolve to freeze redemptions in these funds as has happpened - leaving CNP's investments totally up in the air.

If people think they can find value amongst such complicated financial engineering, good luck to them - i, however, agree with BRICKS.

Another interesting point is that many of these 'investment vehicles' also have a significant amount of their funds invested in Centro Properties (CNP) ---- and have already seen the NAV of these funds written down with the impact of the CNP shareprice collapse

[younga2]

Well, I'm still holding, but rather nervously now..... what are your chaps opinions of their being a saviour for CNP.....? From what I can gather, that would be the best option, though it would dilute our holdings......also, it puzzles me their letter to shareholders in late december stating that the earning have been revised downwards to 40 cents or so... but if they are in more trouble, would they forewarn the market or is the expected earnigns of 40 cents still valid.

[soulman]

younga2, when you said nervous, at what price are you in and how much at stake?

If you are at a profit, then you can take it. If you have been holding since they were $6 - $7, then you have nothing to lose. Not much anyway.

[younga2]

hi Soulman
I got in last week with some $1.20 call options... not much at stake - just play money, but I was hoping for a nice half year... from what some of the others appear to say, the company is looking more like going belly up. May I ask if you are holding?

[_Michael]

CNP in FY07 generated the bulk of its revenue from its "property services" - ie property management. CNP has been borrowing to essentially buy FUM (ie property management income ) - not to buy properties.



This is not actually correct Steve, the FY2007 result was as follows;

Property Investment Revenue $183m (23%)

Total Revenue and Income $795m (77%)


Now watch, the money was borrowed to buy properties, but they then packaged them in separate entity vehicles so they can build their FUM and attract the usual service fees that go with this (which form most of the property services income).

However, they also own stakes in each of the entities that own the property and if you look again at the profit and loss, look past the revenue summary you will see itemized income - they account here for rental income via their ownership stakes using the equity method

The line item is "Share of net profits of associates and joint venture partnerships accounted for using the equity method" which means, in simple terms: "because we hold the properties (or in other cases businesses) as securites we record income as income only and do not split out revenue line" in a similar way that LICs report dividend income from their holdings).

So you will see that your quick glance conclusion that "property services forms the bulk of the revenue" is not actually accurate. I don't mind a good debate, especially if it brings new information and perspectives to the table but think it important to get the facts right rather than pick stuff off the media.

I do agree with you that CNP is a convoluted display dodgy number shuffling to say the least, and would also add that nobody is pretending to be in a position to understand the value of CNP well enough to make it investment-grade. Especially against a backdrop of falling commercial property prices.

Rather this a speculative foray for me based on forming my own opinion of probable outcomes based and not letting the media or others influence my thinking. The foundations are basic;

-Operationally the company is strong, with tenants in non-discretionary markets predominantly, e.g. Walmart, Woolworths, Kroger

-Funding would solve their problems, therefore potential entrants into the fray would be converting a distressed asset into a non-distressed asset

-This is a wager on the motivations of the stake-holders and as i've said before the banks (who hold all the aces) have absolutely no motivation in destroying equity-holder value, it would be completely counter-intuitive.

-This makes an ideal scenario for a large hedge fund or private equity firm, they have the opportunity to acquire assets at a deep discount because they are "distressed" but if they are well capitalized the terminal problems disappear and only transient problems remain. Even if you assume no more FUM revenue - at $1 per share the acquirer gets access to access to around 30% rental cash flow yield - it would take expensive funds for that not to work out value accretive.



Do your own research - i don't recommend CNP as a sensible investment.

[soulman]

I was going to buy into the physical shares at $1.00 to $1.10 but opted out. The only reason was this - T/O or merger of the entire operation. The more the day goes past and no announcement, the more it's unlikely to happen. Selling off partially of their operation won't be that positive. Just look for any substantial holding by Westfield or a PE group and then you are to be rewarded. And to think PE are being affected by the credit crunch, then maybe you can rule them out as well. Like I said before, anyone that T/O CNP will inherit their problems as well.

Just like RAMS, I was lucky not to touch RHG because I thought it was a top candidate to be taken over by one of the big banks. Just didn't eventuate and will not happen at all now.

[_Michael]

Just like RAMS, I was lucky not to touch RHG because I thought it was a top candidate to be taken over by one of the big banks. Just didn't eventuate and will not happen at all now.

Soulman,

Yeah - that is a good point I guess... the same logic could have been applied to Rams but the banks were only interested in the brand.... steering clear of the loan-book. Other big worry is the collapsing commercial property markets.

Interesting times we live in though... everydy a new twist or turn out of the US

[_Michael]

Property Investment Revenue $183m (23%)

Total Revenue and Income $795m (77%)



Edit/Correction; first line should read:

Property Services Revenue $183m (23%)

[winner69]

Somethings are all too complicated to understand ..... even when in graphical form

Suppose the slide that keeps popping up in their preso's make sense - the one titles 'Centro's co-investment business model' which shows how $1 of Centro money ends up with $10 of Retail property Assets.

Goes like $1 Centro money + $1 from Diversified Funds (DPF and DPFI) + $2 from Ownership Funds (Syndicates, Wholesale Funds etc) + $6 Debt gives you $10 of Property


No doubt somebody knows how it all works but halebops earlier post seemed to sum up the dangers of the model.

[steve fleming]

So you will see that your quick glance conclusion that "property services forms the bulk of the revenue" is not actually accurate. I don't mind a good debate, especially if it brings new information and perspectives to the table but think it important to get the facts right rather than pick stuff off the media.


Err....Michael, i think you will find i am actually correct....contrary to your statement i actually looked it up myself rather than rely on the ill-informed media.

I think you are getting confused in relation to revenue & income - there is a difference.

Nevermind though....

I'm sure the accounts for FY08 will look totally different to the values as at 30 June 2007 - if CNP is still around!

[steve fleming]

I don't mind a good debate, especially if it brings new information and perspectives to the table but think it important to get the facts right rather than pick stuff off the media.


Hopefully _Micheal won't be too annoyed, but i found this media article interesting:

http://business.smh.com.au/centro-supporter-cuts-exposure-to-property-group/20080107-1knb.html

"On a risk-weighted basis [at 40 cents] the stock was worth buying," Stuart Barton, a spokesman for UBS, said yesterday "But as the price rebounded and the risk was continually assessed, it was prudent to partially sell down the position."

- So UBS averaged down, then took some profit.



" Centro has until February 15 to come up with a rescue plan. Analysts at Merrill Lynch said the likeliest outcomes were that the company would either sell stakes in some property funds to comfort its lenders, or find a white knight to inject equity at a discount.
"Unfortunately, neither of the two scenarios are rewarding for existing shareholders," Juan Sanabria, an analyst at Merrill, told clients.
Mr Sanabria said as a distressed seller Centro would have to sell assets below book value to cut debt - meaning the company may end up being worth as little as 26c a share".

[_Michael]

I think you are getting confused in relation to revenue & income - there is a difference.



No confusion at this end Steve/

There is a difference between revenue and income, yes. In this case its because the income is coming from their portion of ownership in securities, and not from property directly owned as discussed in my last post. Other than that they are both added together in forming the "revenue" that contributes to earnings (otherwise how would you have net profit of $470m om the back of revenue of just $366m - does that not strike you as odd?

Your original analyis was based solely on revenue which, in my opinion is highly irrelevant as it ignores actual rental income, what you're saying is that when valuing a property manager / holding company - you should ignore the rental income but that will not give you the full picture. I would have thought that any valutation is about how much profit the entity generates, in assessing this you cannot leave out rental income (which is seperate to "revenue").

[JBmurc]

As more negative news comes to light on CNP the more it looks good as a CFD short 50% margin (falls 50% you make 100%) 50/50 chance of falling to 60c????? close stops needed

[winner69]

The article that apparently is the cause of another sell off in CNP shares today

ASIC summons Centro for talks

Anthony Klan and Michael West | January 10, 2008

THE corporate regulator was locked in discussions yesterday with Centro Properties Group over its $5 billion credit-crunch meltdown.

Although neither party would discuss the meeting, ASIC is likely to be interested in Centro's failure to properly account for more than $1 billion of debt in its June 30 accounts.

In those accounts, Centro incorrectly classified $1.097 billion of current debts as "non-current" in a move that masked a $450 million funding blackhole that would have showed that Centro was unable to pay its short-term debts.

The Australian, present in ASIC's foyer yesterday on unrelated business, overheard the Clayton Utz lawyers advising the Centro representative before the ASIC meeting. During that discussion, the Centro representative made light-hearted comments to the lawyers about how he believed in taking an optimistic view of unfavourable circumstances.

Separately, the Commonwealth Bank of Australia is now understood to be the first Centro lender to have pulled long-term debt funding from the group last month, triggering Centro's debt crisis three weeks ago. The CBA held $600 million first-ranking secured debt and $600 million of unsecured debt with Centro, a banking analyst said.

He said NAB, the Bank of America, ANZ and St George were among the other financiers with outstanding loans to Centro.

The banks are engaged in a vigorous debate over the security of their Centro loans, an issue clouded by the complexity of the shopping centre giant's structure.

The analyst said the debate could limit Centro's ability to stay afloat, with the major lenders able to call the receivers in. In relation to Centro's meeting with ASIC yesterday, analysts said the commission would probably be interested in a range of issues surrounding Centro's market disclosure, both before and after its share price crash last month.

"There has been been speculation over the past three years over about five issues that Centro could have potentially had to deal with ASIC on," an analyst said.

One was Centro Property Group's controversial move early last year to transfer a stake it held in satellite Centro Retail Trust to the group's unlisted Centro Direct Property Fund and Centro Direct Property Fund International.

That move was criticised by some analysts, who claimed it could disadvantage investors in those two unlisted funds, as they would have to pay more for stock in Centro Retail Trust than parent Centro would pay.

"In the latest set of announcements it looks as though Centro now owns that stake again, but there has been no commentary in Centro's accounts associated with it," the analyst said.

The timing of Centro's Friday announcement - that some of its lenders had slashed the amount they were willing to lend to Centro on fixed terms - was also something that may have attracted ASIC's attention.

"Realistically, under continuous disclosure, it strikes me as very interesting that those two announcements would come out at 4.07pm when the market closes at 4pm," the analyst said.

"While it may not be something that in itself would get you a call up into the ASIC office, it's the kind of activity that would lead people to believe ASIC would be investigating them."

Centro shares fell 5c at $1.11, in line with the market.

http://www.theaustralian.news.com.au/story/0,25197,23029905-25658,00.html

[winner69]

having another go over the next few hours from 88.5 ------- I think it will end up higher than this today ------- won't be holding overnight though

[macduffy]

having another go over the next few hours from 88.5 ------- I think it will end up higher than this today ------- won't be holding overnight though

Not much room to move at the moment.

Market now 90/90.5.

[kura]

That was an interesting article W69, funny when you think about it, that todays drop was caused by a CNP guy trying to be a comedian, and gets spotted by a journalist.

[soulman]

You still in Winner? The Centro saga is hard to call ATM. I was lucky to cancel my buy order 2 days ago at $1.08 as I see only one positive (a takeover) and many, many negatives.

[winner69]

having another go over the next few hours from 88.5 ------- I think it will end up higher than this today ------- won't be holding overnight though

Out at 90 well before the close so even after costs a bit of dosh but I did think there was going to be a decent bounce after that pretty dramatic fall early in the day but it didn't eventuate .... never mind ... always another day

Turnover was 100+ million shares today .... one of the biggest since the first couple days of this saga .... which could be seen as a ominous sign.

That article was pretty damming stuff really so tomorrow could be another interesting day as well

[winner69]

Great call from Macquarie Equities client adviser David Halliday ....... "One thing is for sure ... that in four weeks time it will not be at 90 cents, it will be either significantly lower or significantly higher."

http://business.smh.com.au/centro-shares-slashed-again/20080110-1l8w.html

[younga2]

Well looks like a good call from some of you guys.... I'm still in, so the next hope is that the half year is going to be the predicted 40 cents a share... emailed the company but the standard stuff...

"As per the announcement of the 17th December 2007, the FY08 forecast is 40.6 CPS and any alterations to this figure will be announced to the market, if indeed there are any alterations.
However please be aware that for reasons of prudence, Centro will not pay a distribution for the period ending 31 December 2007 and the cash proceeds will be used to improve liquidity within the group and reduce short term liabilities.
If you have any further queries, please contact Investor Services on 1800 802 400 or email investor@centro.com.au.

[winner69]

Well looks like a good call from some of you guys.... I'm still in, so the next hope is that the half year is going to be the predicted 40 cents a share... emailed the company but the standard stuff...].

...... don't you mean FULL year?

[_Michael]

Its all getting very interesting, but i never-the-less bailed out yesterday, (as per my post on Tommy's Buy, Sell, Hold thread this morning. Despite my original plan of buying to hold and see out the turbulence i didn't really anticipate the markets falling out all over the show and just wanted to have cash ready to advantage of the big sell-downs... now that value is starting to appear in the market it seemed dumb for me to be holding such a risky play... (despite my annoyingly stubborn optimism about Centro's chances of pulling through!)

[_Michael]

Its all getting very interesting, but i never-the-less bailed out yesterday - as per my post on Tommy's Buy, Sell, Hold thread this morning. Despite my original plan of buying to hold and see out the turbulence i didn't really anticipate the markets falling out all over the show and just wanted to have cash ready to take advantage of the big sell-downs... now that value is starting to appear in the market it seemed dumb for me to be holding such a risky play... (despite my annoyingly stubborn optimism about Centro's chances of pulling through!) Also there seems to be no shortage of cheap property stocks (nor retailers) in the markets now...!

[kura]

My thinking is that insolvency experts will only recommend one thing in their investigating accountants reports, and that is more work for insolvency practitioners !

........

Bankers count cost of Centro going broke Font Size: Decrease Increase Print Page: Print John Durie | January 11, 2008
THE big three Australian lenders to the fallen Centro property group have hired insolvency group McGrath Nichol to prepare an investigating accountants' report on the company.

The move to hire the firm highlights the banks' concerns about Centro and just what plans are being made to save the company.

ANZ, with some $500 million in unsecured loans to Centro, has the biggest unsecured exposure of the Australian banks.

Its loans to the group total about $1.2 billion, roughly the same as CBA, but the latter has just $300 million in unsecured loans. NAB has $1.1 billion in total loans, of which $350 million is unsecured.

Colin Nichol is leading the work on behalf of the banks, but it is too early to say just what action they will take. It seems, at this stage, they simply want to know where they stand, which is no easy matter, given the complicated Centro corporate structure.

This structure also makes life difficult for the board in trying to sell bits and pieces.

Consider the entity known as CAWF, the domestic wholesale fund, which has $2.6 billion in assets, $900 million in debt (including some CBA money) and is half-owned owned by Centro and half-owned by its 51 per cent-owned DPF.

Now if someone wanted to unravel that and lodge a bid for the assets, CBA might just be waiting at the door to get its money back.

Plans to recapitalise the entire company are a fine alternative, but arguably too late. Getting the right level of disclosure and guarantees, now the company is trading again and the debacle open for all to see, will be tough.

Maybe this explains why the stock took another dive yesterday, down 22.5 per cent to 86c a share on huge retail-led turnover.

[Lizard]

Trading halt - will Winner be relieved or sorry that he stuck with plan and didn't hold overnight?

[spruik]

Winner will at least be able to sleep for a few days!

[soulman]

Gee, a big drop yesterday and halt. Was insider getting out yesterday.

Maybe a T/O. Is this a coin flip or disaster.

[younga2]

I have a hunch that it ain't going to be good .... like you said, some leakage yesterday.....

[winner69]

CNP was never one to hold overnight if having a bit of fun day trading on the volatility .... then again they could have gone into a trading halt at 3pm yesterday and i might have been stuffed

Why the trading halt ---- might be good news .... might be bad news

The way it has panning out I don't think it is a 50/50 thing ..... you would have to think it is bad news for shareholders ....... and after what has gone on bad news is finally the last straw

Then again a nice white knight might have emerged and done the decent thing and paid of all the loans without dikuting shareholders interests and everybody can rejoice in getting a growing 40 cents dividend into the future

[winner69]

The Australian says trading halt to plcate the banks .....

Centro move to placate nervous banks

John Durie | January 11, 2008

CENTRO chair Brian Healey has taken his company off the bourse to give him time to placate some increasingly nervous banks.

But, as things stand today, just whether this will be possible is still in doubt.

The trading halt is to sort out the banks and it seems more likely to be bad news, with an equity recapitalisation not on the immediate agenda.

Advisors to the fallen $8 billion property group had spruiked the concept of an equity recapitalisation along the lines of that being engaged by Merrill Lynch et al on Wall Street, with sovereign equity funds from Singapore to Abu Dhabi coming to the investment banks rescue.

The difference between Centro and, say, Rams Home Loans is the latter is a fundamentally good business which relied too much on short term funding from a market which disappeared overnight.

Centro has long been an accident waiting to happen - a complicated over leveraged vehicle which paid too much for dodgy assets.

To make matters worse, while most companies engage a few banks to syndicate big loans so everyone knows where they stand, Centro adopted the model of getting many banks to lend it just a bit with all sort of cross guarantees such that no-one quite knows who ranks ahead of whom.

That explains why the banks, led by JP Morgan, NAB, CBA and ANZ, hired insolvency firm McGrath Nichol to prepare a report on exactly who stands where.

The banks are nervous and some point to the quick unravelling of Pasminco back in 2001, when Ferrier Hogdson was hired to get a standstill agreement from the banks after the company had defaulted on some loans. When some banks refused the company went into liquidation.

Centro may not be quite at this point yet but the banks are in no mood to carry Centro’s Andrew Scott as the effects of the sub-prime crisis rolls out.

At least the Australian banks have some good news with The Wall Street Journal reporting Bank of America in talks to buy out Countrywide, the US mortgage provider to which most of the big Australian banks have credit facilities.

http://www.theaustralian.news.com.au/story/0,25197,23037147-5013408,00.html

[winner69]

Had to pull this piece out of the above article =

Centro has long been an accident waiting to happen - a complicated over leveraged vehicle which paid too much for dodgy assets.

Most analysts probably thought that but when their pay cheques come from the banks who were prob falling over themselves to lend to Centro none were going to be negative in public were they

The guy from Intelligent Investor was very damming of Centro a feew months ago and he got a blast from Centro saying he didn't know what he was talking about and to stop telling untruths etc etc ...... but he was right.

Some of words in that quote like complicated and over leveraged are true ....... most said they overpiad for a lot of their recent acquisitions, esp the US REITs they were buying .... apparently on a 5% odd yield ....... at the top of the cycle could be dangerous ....... but using the word dodgy might be stretching things a bit far but the writer could be right .... if so Centro must have set a record at being able to buy SO MANY dodgy properties.

All in hindsight but to me whose seen all this before there is not a new order ..... the world hasn't really changed as many say (mainly the whizz kids with MBAs or whatever) .... all these financial instrument things called derivatives and all there many variants don't really derisk the markets ......... good old fashioned fundamental sensible behaviour always seems to keep you out of trouble ..... business wise that is

Just a little rave ....... and good luck to those holding Centro over the weekend ..... and millions of punters are affected to some extent ........ and almost certain that some of Winners super money and Kiwisaver money in there somewhere

[etrader]

As you guys will have spotted MFS has emerged to say they're taking over the management of 36 closed funds, they will not own any centro property.

Think there will be bad news coming our way


Disc:Hold :(

[soulman]

It seems the announcement by MFS killed their SP.

Bad news for who? CNP or MFS. I think both. Although MFS did open higher in the early morning.

There has been a lot of insider or specs trading here. Both CNP and MFS were both hammered yesterday for no news and MFS continued on today.

[Huang Chung]

It seems the announcement by MFS killed their SP.

Bad news for who? CNP or MFS. I think both. Although MFS did open higher in the early morning.

There has been a lot of insider or specs trading here. Both CNP and MFS were both hammered yesterday for no news and MFS continued on today.

Tell me about it Soulman....took a big chunk of MFS stock yesterday only to watch it get crucified again today. Totally agree that their announcement this morning didn't help one iota....not that there was anything wrong with it, but just putting the words 'Centro' and '$150m of debt falling due this half' in the announcement was utter poison in this jittery market. :eek:

[winner69]

The Australian (been calling it right so far) saying its all over and performing the last rites

http://www.theaustralian.news.com.au/story/0,25197,23040466-601,00.html

I said it would be a bit of bun fight .... more like vultures over the carcass ...."Its suspensions came as lenders to the group were locked in debate about who had first rights to its debt" .....hells bells if the banks don't know where they syand they ain't going to lend any more


Trading halt signals end is near
"Squabbling banks ........... "
http://www.theaustralian.news.com.au/story/0,25197,23040324-643,00.html



Centro a cold case with messy forensics
http://www.theaustralian.news.com.au/story/0,25197,23039522-5013408,00.html
Good phrases in this article ..........."CENTRO Group as a corporate entity is already dead....." and "....now its just a matter of how the entity is carved up." and to add to the complexity "Centro's Scott lured some investors into the funds with guarantees" makes the whole debacle even more intriguing

[_Michael]

Agree its not looking very hopeful judging by the prior day price action/volume before the trading halt.

Geez, looks like my theory could not have been more wrong - a good lesson (a cheap one too, by luck not skill).

I see most debt-laden businesses all taking a good hit lately (ABC Learning Centres, Transpacific Industries, Boom Logistics, Vision Group Holdings....)

Makes you wonder what management inspires management too pile so much debt up on their balance sheets... and not taking a more measured approach.

[Huang Chung]

I see most debt-laden businesses all taking a good hit lately (ABC Learning Centres, Transpacific Industries, Boom Logistics, Vision Group Holdings....)

Makes you wonder what management inspires management too pile so much debt up on their balance sheets... and not taking a more measured approach.

But whilst the market might decide to take a dim view of debt laden companies, it doesn't mean that the underlying businesses are suffering. In fact, it could be an opportunity to buy good businesses on the cheap.

Transpacific is definitely on my watch list.

[_Michael]

But whilst the market might decide to take a dim view of debt laden companies, it doesn't mean that the underlying businesses are suffering. In fact, it could be an opportunity to buy good businesses on the cheap.

Transpacific is definitely on my watch list.

I agree. Also have Transpacific on the watch-list, although there debt is at a stage that it could get them into proper trouble if there was an operational hiccup.

[Huang Chung]

I agree. Also have Transpacific on the watch-list, although there debt is at a stage that it could get them into proper trouble if there was an operational hiccup.

Also agree.

[winner69]

Somethings are all too complicated to understand ..... even when in graphical form

Suppose the slide that keeps popping up in their preso's make sense - the one titles 'Centro's co-investment business model' which shows how $1 of Centro money ends up with $10 of Retail property Assets.

Goes like $1 Centro money + $1 from Diversified Funds (DPF and DPFI) + $2 from Ownership Funds (Syndicates, Wholesale Funds etc) + $6 Debt gives you $10 of Property


No doubt somebody knows how it all works but halebops earlier post seemed to sum up the dangers of the model.

Glad i wasn't the only one who couldn't understand the model ..... this from an article in the SMH

Management's plans for growth were set out in simplistic presentations, which showed how the company turned $1 into $10 through the use of a few arrows and a bunch of investors. It required blind faith to appreciate it.
http://business.smh.com.au/beam-me-down-please-scottie/20080111-1lia.html?page=fullpage#contentSwap2

Good article about the history and the in and outs of this disaster


If i knew how to post pictures you could appreciate the few arrows as well .... but it appears in most of Centro presos

[Huang Chung]

Lifted from the Centro website.....sounds so re-assuring.

Why Invest with Centro?

Retail Property Specialist – Centro specialises in the ownership, management and development of retail property. Centro is the second largest manager of retail property in Australia and the fifth largest manager in the United States. Centro’s in house property management, development and leasing resources, combined with a network of regional offices and experienced team is seen as a particular strength in the managing the performance of the retail assets and returns to investors.
Proven Track Record – Centro is proud of its strong performance history and the way in which it has been able to maximise returns to investors through its customer focused and value adding team based approach.
Local Expertise & Knowledge – When you invest with Centro, you benefit from both the funds management expertise of Centro as well as 'on the ground' property management from our locally based offices in Australia and the US. Centro actively manages retail properties and utilises local knowledge and expertise to maximise returns to investors.
Management of Interest Rates & Foreign Exchange – Centro’s conservative capital management approach ensures that CNP and CER's distributions will be protected against interest rate and currency risks.

[bermuda]

Lifted from the Centro website.....sounds so re-assuring.

Why Invest with Centro?

Retail Property Specialist – Centro specialises in the ownership, management and development of retail property. Centro is the second largest manager of retail property in Australia and the fifth largest manager in the United States. Centro’s in house property management, development and leasing resources, combined with a network of regional offices and experienced team is seen as a particular strength in the managing the performance of the retail assets and returns to investors.
Proven Track Record – Centro is proud of its strong performance history and the way in which it has been able to maximise returns to investors through its customer focused and value adding team based approach.
Local Expertise & Knowledge – When you invest with Centro, you benefit from both the funds management expertise of Centro as well as 'on the ground' property management from our locally based offices in Australia and the US. Centro actively manages retail properties and utilises local knowledge and expertise to maximise returns to investors.
Management of Interest Rates & Foreign Exchange – Centro’s conservative capital management approach ensures that CNP and CER's distributions will be protected against interest rate and currency risks.


Sort of reminds me of ENRON.

The American economy has been living on borrowed time. Thanks to that very shallow Alan Greenspan. He always knew better than others ( read..I dont listen )

This is going to be a big wake up call. I saw that SEC was picking Centro in the 2008 comp and I thoght it wasnt a bad call.

Now I aint too sure.

Centro's got ENRON all over it....i.e there is a lot of explaining to do and everyday it seems to get worse.

I dont like this at all despite the learned views of a lot of earlier Posters.......which initially led me to believe that SEC had made a pretty sauve choice.

Just an opinion.Havent followed this in detail.

[jackt]

I haven't done much research into CNP's fundamentals yet. But a quick reading of its 30.06.2007 financial report reveals a NTA per share of $2.29 and retained profits of $1.2B. Despite the massive debt servicing problem, I believe CNP should still be generating profits for 1H before being hit big-time in 2H for want of liquidity.

In terms of fire sale to generate quick cash, what's CNP's fire sale worth per share? At 50% of its NTA ps? I doubt that the directors will approve such a high discount to its assets because this may trigger class action by shareholders who are already very unhappy with the absence of disclosure regarding the company's debt risks and are contemplating or on the verge of initiating class action.

Juxtaposed against this difficulty for the directors is the reality that predators know CNP is desperate. They have begun sniffing around the periphery and will try to get a great bargain for CNP's assets. They have the cash and are prepared to wait while CNP races against time. Given the high level of stress borned by the directors, it's not surprising that the CFO is on time out.

Adopting a gloom and doom perspective, let's say that all the assets are sold for 50% of actual value. Wouldn't that still give CNP a NTA valuation of a minimum of $1.30 ps, with fair possibility of an upside?

Never mind the convoluted CNP company structure that no one other than a select few can understand. In an uncertain time like this I believe that it is prudent to go back to the fundamentals. It's very important to work into the fundamentals an adequate discount factor so as to protect our CNP investment from unexpected surprises. Then check the discounted fundamentals against market sentiments and analyse for significantly oversold positions. After which, check against our own risk-reward tolerance level. If this strategy is properly carried out, we can pin down excellent opportunites for arbitrage.

For me, the opportunities begin to appear when CNP's sp falls below 90c. But that may not be so for other investors. It has much to do with the opportunity costs to our personal finances. And to our mental health.

[bermuda]

I haven't done much research into CNP's fundamentals yet. But a quick reading of its 30.06.2007 financial report reveals a NTA per share of $2.29 and retained profits of $1.2B. Despite the massive debt servicing problem, I believe CNP should still be generating profits for 1H before being hit big-time in 2H for want of liquidity.

In terms of fire sale to generate quick cash, what's CNP's fire sale worth per share? At 50% of its NTA ps? I doubt that the directors will approve such a high discount to its assets because this may trigger class action by shareholders who are already very unhappy with the absence of disclosure regarding the company's debt risks and are contemplating or on the verge of initiating class action.

Juxtaposed against this difficulty for the directors is the reality that predators know CNP is desperate. They have begun sniffing around the periphery and will try to get a great bargain for CNP's assets. They have the cash and are prepared to wait while CNP races against time. Given the high level of stress borned by the directors, it's not surprising that the CFO is on time out.

Adopting a gloom and doom perspective, let's say that all the assets are sold for 50% of actual value. Wouldn't that still give CNP a NTA valuation of a minimum of $1.30 ps, with fair possibility of an upside?

Never mind the convoluted CNP company structure that no one other than a select few can understand. In an uncertain time like this I believe that it is prudent to go back to the fundamentals. It's very important to work into the fundamentals an adequate discount factor so as to protect our CNP investment from unexpected surprises. Then check the discounted fundamentals against market sentiments and analyse for significantly oversold positions. After which, check against our own risk-reward tolerance level. If this strategy is properly carried out, we can pin down excellent opportunites for arbitrage.

For me, the opportunities begin to appear when CNP's sp falls below 90c. But that may not be so for other investors. It has much to do with the opportunity costs to our personal finances. And to our mental health.

Look, I dont know too much about Centro but it is fascinating and to me has parallels with the highly convoluted Enron structure.

Your quote 'Never mind the convoluted CNP structure that no one other than a select few can understand' sends 'Enron' shivers down my back. Get the Enron tape....a must for everyone.

[Halebop]

Adopting a gloom and doom perspective, let's say that all the assets are sold for 50% of actual value. Wouldn't that still give CNP a NTA valuation of a minimum of $1.30 ps, with fair possibility of an upside?

If the assets were sold for 50% of actual value they would realise around $13.25b, leaving -$5b in negative equity after deducting the $18b or so in debts. Debt is 70% of assets. There is no margin of error in that sort of leverage. NTA is an illusion.

If they don't find a source of cash flow to refinance, not only will lenders move to protect their interests, CNP and the numerous property structures will begin to incur whatever penalties the loans hide in their fine print. The whole thing appears byzantine in complexity and as time goes on I suspect this complexity was intentional. However, it will probably only take a single structure to fall over and the whole deck of card will collapse as guarantees are called in and some markers become worthless. Negotiating with a wide number of lenders, some of which will have competing interests, will prove all but impossible.

I would rate CNP's survival chances as low. Should they manage to negotiate a deal, I'll be truly astounded if they survived intact or without major dilution to existing share holders. The 40 somethings cent low will start to look good (and $10 looks simply crazy). It's amazing that their reckless strategy was entrusted with so much money but a bull market (or at least the end thereof) typically exposes this style of foolishness.

[_Michael]

It's amazing that their reckless strategy was entrusted with so much money but a bull market (or at least the end thereof) typically exposes this style of foolishness.

I only became interested in CNP as arbitrage post-problems (usually don;t go near property trusts because don't see the point in paying for salaries and management fees on top of the assets), but have been very naive in thinking that surely there will be a way forward for them. The more that comes out though the more it amazes me that nobody ever questioned anything when the share price was soaring, and as Halebop says that exposes the listed property bull market for its true worth - but oh how clearly we see, through the rear-view mirror!! Although must say credit to the Intelligent Investor who called this demise some time ago (at last they picked something right!).

[MoSteph]

I tend to agree with you guys here, thinking that it's more likely than not CNP will fail to survive and that 20/20 vision (or hindsight bias) makes things seem so beautifully clear (yet meaningless). Attributing likelihood, which many have been doing, to such a failure is curious, though, because it hangs simply on how chummy the directors are with big lenders - I suppose I would give a 30% chance of sufficient chumminess.

CNP was a strong company. Property was a strong asset. Consumers were buying, so retail property was a really strong asset. More than anything, for me, this all shows how value/equity/worth really is a farce. Something is only worth what someone's willing to pay. Similar applies to lending. But leverage doesn't make a company riskier (because the risk is commensurate with the reward), it makes events unfold faster... (which may make them riskier...heh)

[winner69]

Last August Centro apparently could have refinanced all of its short-term debt.

Doing that would have come at the cost of higher interest rates ....... less profit ...... smaller payout ....... disenchanted unit holders and a hit to the shareprice

So couldn't do that could we ......... but then the shop closed

This is a unmitigated disaster ......... affecting millions of people in same way or another ..... even some of Winners super and Kiwisaver money no doubt is at risk

[winner69]

The shares are heavily discounted but the debt is not. With some $26b in assets supporting $18b in debt, a 30% equity margin at the top of the market is hardly a no brainer. The CNP "leveraged" growth business model relies upon 4 factors:

Investor inflows (not outflows) and acquisitions (not divestments)
Development margins to fatten fees
Low interest rates
Stable or (preferably) rising capital values

.

Halebop correctly pointed out the drivers of the Centro $1 into $10 of property model

Works if all things working .... together .... one part gets broken and the model is broken

[winner69]

If Phaedrus was in this he would have been out at $8.50 at the end of July .... thats what the charts say .... the long term uptrend was over

Amazing that it wasn't that long ago Centro was about $10 ..... now $1.50



Talk of NTA being $2.29 and all the fundamental things that say centro was a great company hasn't really meant anything has it.

People were selling out in June/July .... the charts say so ..... those with real money were taking it off the table

See TA does work . and can save a lot of pain

(PS ___ MacDunk would have sold out closer to $10 when the 30 day MA line was broken)

[abucus]

Thanks for the links winner69. It seems the NTA investor guarantees changes the value of CNP quite substantially.

[OldRider]

Reminds me of an old quote, whose source I cannot recall

Recessions uncover what auditors do not.

[soulman]

Thanks for the Enron heads-up Bermuda. I got it out that day and it was fascinating.

I just wonder what happen to that bloke that go to the strip club everyday and walked away with $350 mil. Is he convicted or is he living happily ever after somewhere?

[kura]

Thanks for the Enron heads-up Bermuda. I got it out that day and it was fascinating.

I just wonder what happen to that bloke that go to the strip club everyday and walked away with $350 mil. Is he convicted or is he living happily ever after somewhere?
He became the second largest landowner in Montana ! (no conviction)
He seemed to be lucky in timing his exit & sale of his Enron shares, needed funds for divorce settlement, (wanted to marry his stripper girlfriend)

I liked how they would artificially create an energy crisis in California, so they could generate massive trading profits.

Great story !

PS: Don't think CNP is in the same category as Enron (of blatant lies & deciet )

[winner69]

Centro back on the bourse today

Watching the open closely to see which way the sentiment goes

I have a feeling that this could be an up day for them ..... hoping to have a few hours worth of profitable fun

[winner69]

So JP Morgan who have had their nose in the trough for years also have heaps of funding guaranteed.... no wonder the banks are worried

http://www.theaustralian.news.com.au/story/0,25197,23052532-5013408,00.html

[winner69]

Centro not ready for administrators yet

http://www.news.com.au/business/story/0,23636,23054410-462,00.html

Maybe yet is the word

Interesting to see what they end up saying

[spruik]

The news contained no news... (in my view, more of the same uncertainty) dragging the sector down with it.

If CNP goes under, I wonder what it will do for the market generally, and specifically the property trust sector:

1. Certainty, sector will start a recovery;
2. Nothing;
3. Market panic, sector goes down futher (taking the whole market down).

[Halebop]

Well they have a new CEO. Pretty standard response to being unloved.

A few millions made and lost in the first 40 minutes of trading - some frenatic price movements but it's so random that I'll leave it to someone with much bigger cojones.

[spruik]

Well they have a new CEO. Pretty standard response to being unloved.

A few millions made and lost in the first 40 minutes of trading - some frenatic price movements but it's so random that I'll leave it to someone with much bigger cojones.

Changing the CEO doesn't change the debt situation...

[Halebop]

All part of their debt reduction strategy. They will pay all staff $3m for completing their consulting terms and then claw that back against unpaid advances on the staff share scheme. That $120m funding hole will be filled in no time. Just another $18b to go. Now where did I leave the cheque book...?

[soulman]

Trading halt and then this. I have left the market completely and solely focus on long-term (2 to 3 years). Luckily, all the coy I hold pays dividends, although it only take one trouble to take this away like the Centro saga. The Centro in my portfolio is MFS, the most worriedsome stock. Just hope the large volume in MFS is not M King or P Adams selling.

Otherwise, this just remind me of Enron. I read today that the Stella operation is about the market cap of MFS ATM. Hence, their Funds Management business have no value. Maybe, they value Stella too highly. Anywho, the drop in MFS today is huge. I bought into MFS, not realising their high debt level. Sometimes, you wish you didn't do certain things. Ahhh, such hindsight.

[winner69]

The Centro in my portfolio is MFS, the most worriedsome stock. Just hope the large volume in MFS is not M King or P Adams selling.



Looks like one director got caught up on a margin call today .... 500,000 shares he had to sell

[spruik]

Trading halt and then this. I have left the market completely and solely focus on long-term (2 to 3 years). Luckily, all the coy I hold pays dividends, although it only take one trouble to take this away like the Centro saga. The Centro in my portfolio is MFS, the most worriedsome stock. Just hope the large volume in MFS is not M King or P Adams selling.

Otherwise, this just remind me of Enron. I read today that the Stella operation is about the market cap of MFS ATM. Hence, their Funds Management business have no value. Maybe, they value Stella too highly. Anywho, the drop in MFS today is huge. I bought into MFS, not realising their high debt level. Sometimes, you wish you didn't do certain things. Ahhh, such hindsight.

MFS phoned me couple of times recently asking to re-invest the $100K I had before in their income fund (and offered a higher interest than advertised). I just don't feel comfortable anymore with these things.

[soulman]

Not a good look with the selling when the shares are sliding. Margin lending call or trying to get out before more troubles?

Thanks for the heads-up on these issues.

[tricha]

MFS phoned me couple of times recently asking to re-invest the $100K I had before in their income fund (and offered a higher interest than advertised). I just don't feel comfortable anymore with these things.

U certainly did the right thing Spruik.

I do not feel so bad after looking at this carnage. F... is all I can say.


http://cb.iguana2.com/stockness/hist2/ASX/CNP/1y/line/30/0/

[spruik]

U certainly did the right thing Spruik.

I do not feel so bad after looking at this carnage. F... is all I can say.


http://cb.iguana2.com/stockness/hist2/ASX/CNP/1y/line/30/0/

Sometimes I get it half right... (bought heeps of MFS at $1.20 years ago and sold at $1.80...) :)

Did you mean to post this in the MFS thread? Anyway, got excited and bought some MFS sub $1, but looks like might have burned it (nothing like $100K).

[steve fleming]

Centro not ready for administrators yet

http://www.news.com.au/business/story/0,23636,23054410-462,00.html

Maybe yet is the word

Interesting to see what they end up saying

Bizarre.

The AFR talks about how close CNP is to going into Voluntary Administration, and the share price goes up 71%.

Given the contingent litigation hanging over CNP’s head as well, just shows how much greed there still is in the market at the moment.

All these traders looking for a quick buck - I wouldn’t touch CNP if you paid me.

[tricha]

Bizarre.

The AFR talks about how close CNP is to going into Voluntary Administration, and the share price goes up 71%.

Given the contingent litigation hanging over CNP’s head as well, just shows how much greed there still is in the market at the moment.

All these traders looking for a quick buck - I wouldn’t touch CNP if you paid me.

Good call Steve, this is terrible!

CNPCentro Properties Group STAPLEDhttp://www.stocknessmonster.com/images/australia.gif http://www.stocknessmonster.com/chart/stockness/hist2/ASX/CNP/1y/line/30/0/

CNPCentro Properties Group STAPLEDhttp://www.stocknessmonster.com/images/australia.gifhttp://www.stocknessmonster.com/chart/stockness/intra/delayed/ASX/CNP

[bermuda]

Good call Steve, this is terrible!

CNPCentro Properties Group STAPLEDhttp://www.stocknessmonster.com/images/australia.gif http://www.stocknessmonster.com/chart/stockness/hist2/ASX/CNP/1y/line/30/0/

CNPCentro Properties Group STAPLEDhttp://www.stocknessmonster.com/images/australia.gifhttp://www.stocknessmonster.com/chart/stockness/intra/delayed/ASX/CNP

Tricha,
That post said it all.

[winner69]

I take it everybody gave up on this

'I wonder what the NAV is today' said the jester

How the mighty fall .... sad really

I don't think I'll be looking for value in this ... even at these sub 10 cent prices ..... even though must be cheap as .... a penny stock that was 12 bucks just over a year ago .... need a log scale on that chart eh

[COLIN]

Well, well, look who's returned from the dead!
I got caught up in the massacre of CNP, which cost me a few pennies at the time. However, I decided earlier this year that it looked like it had a strong chance of survival in some form or other, given the qualified leadership that was brought in and because there were views expressed in respected quarters that there was no way the banks were going to let themselves get into the position where they took over direct responsibility for running a caboose of this size and complexity - something like 700 malls, if I'm not mistaken. So, I took the plunge and bought 100k at 9.5c in July - needless to say I'm not unhappy with where the price sits now (22c when I last looked), and I've recouped all I lost earlier, and more. (I know, I know, I can already hear someone hissing that its not over until the fat lady sings, or something like that, but be assured that I keep an ever-watchful eye on this little punt.)

I just thought someone might be interested. Sometimes there are useful pickings in old dredge tailings!

[KW]

Funny, I just bought some of these yesterday at 21c :-) Some of the REITs are in strong uptrends, so I've picked up a few more for the ride. I got creamed on a number of property companies in my portfolio, but they are now roaring back to life, so I dont feel so bad. I will feel even better when they return to paying dividends.

[COLIN]

Funny, I just bought some of these yesterday at 21c :-) Some of the REITs are in strong uptrends, so I've picked up a few more for the ride. I got creamed on a number of property companies in my portfolio, but they are now roaring back to life, so I dont feel so bad. I will feel even better when they return to paying dividends.

You'll be as delighted at today's progress as I am. Up another 20% so far. Congratulations to us!

In our dreams we can imagine them regaining their previous dizzy heights - dreams are free!

But there must be some catalyst for the rises over the last day or two. I wasn't able to access their answer to the ASX Price Query yesterday - were you?

[COLIN]

I have now seen their answer to the ASX Price Query - says "nothing".
I note that you are domiciled in Aust, KW. Anything particular in the media over there?

[KW]

Up 33% in 2 days. Yippee!
Nothing Centro specific in the news, but a lot of analysts/fund managers are picking the AREITs as likely to provide the best returns over the next year or so. It appears property prices are stabilising, and everyone is getting refinanced. A lot of debt has been paid off with the recapitalisations, so I think its a case of them moving back to their NTA in the belief that the worst is over.

Most of them are operationally profitable, so once the write downs are finished, the prices may also start to reflect EPS.

Foreign investors may also be moving in as Australia is being tipped to be the fastest growing economy this year after India.

[KW]

38% :-)
The buy sell depth here is just stupid. 20 to 1. Maybe someone is mounting a bid?

[COLIN]

Up 33% in 2 days. Yippee!
Nothing Centro specific in the news, but a lot of analysts/fund managers are picking the AREITs as likely to provide the best returns over the next year or so. It appears property prices are stabilising, and everyone is getting refinanced. A lot of debt has been paid off with the recapitalisations, so I think its a case of them moving back to their NTA in the belief that the worst is over.

Most of them are operationally profitable, so once the write downs are finished, the prices may also start to reflect EPS.

Foreign investors may also be moving in as Australia is being tipped to be the fastest growing economy this year after India.

Thanks for that, KW.

So, what other REITs can you recommend?

[KW]

I have held FKP, ILF and APZ through the cycle :-(
MCW, IIF, AEU, CER are on my radar too but I havent bought any.
I did buy THG along with CNP yesterday.

Another interesting thing I noticed is that a lot of the recruitment companies seem to be on a roll too. Employment is a lagging indicator of recession, so I expect it to pick up in about 6 months. Pick of the sector is RHD.

[KW]

Watch the profit taking kick in now. CNP does tend to be a bit of a favourite with day traders, so it will be interesting to see if the price holds.

[COLIN]

Watch the profit taking kick in now. CNP does tend to be a bit of a favourite with day traders, so it will be interesting to see if the price holds.

Yes, predictable.
But I'll still be there, at the end of the day, ready to enjoy the longer journey.

Thanks for those REIT names. Will do some research. I did hold FKP at one stage, but lost patience and ditched them.

[KW]

They are the industry leader, so felt it worth hanging in there. I participated in the cap raising at 40c so did okay out of that. Average buy price still above NTA though, so will really need the development arm to kick in again to get back to square one :-(

Even on hotcopper the daytraders are thinking about buying and holding CNP so maybe a good sign.

[Kees]

best buy so far this year up 180% and it looks like it has longer legs..


hold. cer.apz.vpg.cnp.ilf. just like property.

[absolut-advance]

best buy so far this year up 180% and it looks like it has longer legs..


hold. cer.apz.vpg.cnp.ilf. just like property.

Wow CER has done great!!!, funny I traded it in the 3c range if i remember correctly?, and then took my eye off the ball, silly me, its one fish that got away... big time.

AA

[COLIN]

Watch the profit taking kick in now. CNP does tend to be a bit of a favourite with day traders, so it will be interesting to see if the price holds.

Held pretty well.

(btw, bought back into FKP today - it was a toss-up between them and THG, but in the end I decided that the retirement homes appeal of FKP won out over hotels.)

[KW]

Now up 70% over 3 days. Its moments like these you wish you had chucked every cent you had into it :-)

ILF having a good day too.

[KW]

100% return in 3 days. Why play blue sky miners when there are property companies. I also think that this is going to start some speculative runs on the others as well, everyone is going to be looking for the next CNP

[Kees]

Might pay to hop on to CER can't lag back for long at this rate.
Just bought some myself.
300% + up on CNP times like these makes playing this game worthwhile and enjoyable.

[COLIN]

100% return in 3 days. Why play blue sky miners when there are property companies. I also think that this is going to start some speculative runs on the others as well, everyone is going to be looking for the next CNP

Have just logged on to my Australian portfolio and nearly fell out of my chair. This only happens to other people! But certainly helps to make up for the pain and suffering I endured when they went slithering downhill. Its tempting to cut and run, but I think I will leave my chips on the table - if I'd taken my profits yesterday I would have been fuming today.

But then, again ........................!

[KW]

I've sold at 44c. Sell side is building strongly - suspect some price manipulation going on, so will watch at open tomorrow to see if it momentum is maintained and may jump back on board. But have a nasty feeling that a lot of profit taking may occur tomorrow.

[Stranger_Danger]

Congrats on the gains guys, but honestly, this is a zombie company. It exists solely to allow the Australian banks to avoid selling off the assets, thus reducing the value of their security over other similiar assets by virtue of fire sales leading to a downward spiral.

Number of Centro shares traded = heaps, and at rising prices!

Number of actual shopping centres etc sold to people able to raise financing to buy them = very very few!

Enjoy the ride, but it is companies like this that will soon see me jumping off the train.

The greed that can be observed with the speculative rally in utter crap is no different to the fear that saw people sell off debt free companies with low multiples in Oct-Mar....

Talk about short memories!

Don't get me wrong, I have very much enjoyed the last 6 months and have never made so much money. However, written on a piece of paper next to my computer currently are the words 'DO NOT BECOME A BELIEVER'.

This is a classic bear market rally, it is not the beginning of a new bull market and the fundamentals are not in place for a healthily growing economy.

[COLIN]

I've sold at 44c. Sell side is building strongly - suspect some price manipulation going on, so will watch at open tomorrow to see if it momentum is maintained and may jump back on board. But have a nasty feeling that a lot of profit taking may occur tomorrow.

I capitulated too, KW, and sold the lot. Got 43c - not quite as good as your 44. It just got too hot altogether.

[KW]

I think there is a big buyer in there, but I think the daytraders are back on board today and its them that drove the price up. The main buyer is not being silly enough to jump in at such a high price. Maybe in a day or two it will resume its run, but expect from a much lower price point.

In the past I've always hung on too long and have suffered the big retracements. This time I'm learning :-) (of course, CNP will now probably turn out to be the exception!!)

[Kees]

I have to disagree
This rally is not greed but someone buying a big stake (chineman)
This is a profitable company making lots of $ and being mainly shopping centres can't
go wrong (if your a retailer the only place to sell your whares is in a shopping centre)
Bear market or not this will pass a buck real soon (he hopes)

[KW]

Well, the intraday chart looks sick - lots of red candles pointing ever lower. Happy to sit back and wait on this one.

[Stranger_Danger]

Kees,

You can go wrong if your debts are visible and huge. Your assets are very hard to value because there is almost no market for them, but clearly they are declining in value.

You can go wrong if - despite your assertion that retailers have no choice but to be in the mall - they do have the "choice" to go broke, as some are doing.

You can go wrong if this means you need to offer rent holidays and discounts, something that is happening often.

You can go wrong if your new tenants talk to your existing ones who then demand the same treatment.

You can go wrong if this leads to a further round of lower asset values and decreases the gap between your assets and liabilities.

I agree with you on a very basic level that if you owned the only shopping centre in your town, with no or low debt, then yeah, failing your town becoming the next Detroit you probably couldn't go wrong.

That is NOT what CNP is, however.

[Kees]

If the sky falls we are all dead.

Have you been shopping lately

I might be basic in my thinking but always the optomist.

[Phaedrus]

This stock gives a series of nice clear examples of price breakouts above previous resistance with each and every one accompanied by confirmatory volume increases. The attendant "Buy" signals are marked by green arrows. The volume spikes are well above average levels, quite unmistakable and provide very timely confirmation of any significant breakout.

There are many volume indicators and here are 8 of the most commonly used. In this instance, 2 of them stand out well ahead of the rest, giving obvious and unequivocal "Buy" signals each and every time the indicator rises above previous highs. You can, of course, glean the same information directly from the volume histogram at the bottom of the chart, but cumulative indicators make the job quicker, easier and give totally objective signals.

http://h1.ripway.com/78963/CNP924.gif

The large assortment of volume indicators featured here is especially for Strat who is endeavoring to find which is the "best".

[KW]

Almost 20% of the company's share capital was traded today. I think we made the right decision to sell - price now down to 37c and sell depth now at 23 million (up from 2 mill this morning).

So next question - do we buy back in? And at what price?

[COLIN]

So next question - do we buy back in? And at what price?

Ask Phaedrus to let us know when the signs are all favourably aligned?

[KW]

This might be one for Yogi :-)

[Junior80]

I bought this stock when I was just starting out in my trading/investing career. A poor move. Bought in around $1.10 and have not average down. Should've, could've but just thought i will put this in the back burners and wait for it to rise again. Good to see this is starting to increase but still a long way to go for me unfortunately. :)

[KW]

Jumped back in this morning at 39c but then got out again in a hurry - still that was the quickest few hundy I've made in a while :-)

[COLIN]

Jumped back in this morning at 39c but then got out again in a hurry - still that was the quickest few hundy I've made in a while :-)

You would have to be extremely nimble with this one at the moment. Because of the sheer volumes I have noticed that by the time one gets an order typed up, transmitted, acknowledged, and placed, the buy/sell can be significantly different from what it was when you made your decision. I'm staying firmly on the sidelines.

[KW]

Thats the problem with trading through a NZ broker. With Comsec the order executes instantly once you hit submit. I just pretype the order and leave it there waiting to go.