Allco buys a Record: RCD/ RRT

[k1w1]

With an up coming distribution to be announced due to a 40% return on a building sale and a distribution on refinancing a lease extension there is a good chance that the current price of options ( 6c, exercise price 1.00) and shares (1.04)will rise.

For example if the share price rises say 4 cents then -

if you purchase the share you have made a 3% gain on your investment .

if you purchase the option you have made a potentially proportionately larger gain as the options are likely to rise on the announcement as well.

If you choose to then convert some of the options to the share you may get a return of some of the option price from the distribution. This would protect your downside cost of the option which still has a long time to run and leave you exposed to RRT upside. Options expire in June 2005.

My view is that there is upside here as CBD real estate is the area likely to recover earliest.

As you can buy more options than shares for the same amount of money you can gain a bit more exposure for less outlay.

Record Investments, who run this property trust, are good operators whom Aspect Huntley has recommended as a buy. Certainly my shares in them have increased 35% since purchase without counting the dividends . Their policy is to pay out 100% of net profit as dividend .

RRT is Record Investments market secret at the moment.

Hold: RRTO, RCD

[k1w1]

RRT Shares vs Options ?



On 12 June Record Realty Trust announced

"Cash distributions over the next 6 months will result from two transactions:

1. Sale of Boral Materials Headquarters, Greystanes, NSW.

Record Realty held a 50% interest in this property. A sale has been finalised and upon settlement Record Realty will receive net sale proceeds of approximately $5.6 million.The initial equity investment of $3.2 million will be retained and reinvested by repaying part of a working capital facility. The capital gain of approximately $2.4 million will be
distributed to unitholders. The return to Record Realty from this investment will be approximately 45% per annum.

2. Refinancing of National Parks Headquarters, Bridge Street, Hurstville.
Following the recently successful completion of a new lease, negotiations to refinance the property are progressing. Whilst the outcome is still subject to a number of variables the refinancing should result in a distribution of not less than $3.6 million.The combined distribution from the two transactions should be not less than $6.0 million. This
would provide a distribution of 15.5 cents per existing unit (i.e. on an undiluted basis). If all the outstanding options were exercised in the current period, the distribution would be 7.8 cents per unit.

The distribution is expected to be made during the quarter ending 30 September 2004. For taxation purposes, we anticipate that a majority of the distribution will be either a capital gain or a return of capital. This notwithstanding, we anticipate that the distribution will not result in
a reduction in the exercise price of options outstanding following the the current exercise period.

A distribution reinvestment plan will be introduced to enable investors to reinvest all or part of their distribution.

When assessing the overall performance of your investment we highlight that this distribution represents the crystallisation of returns from only two properties in the Record Realty portfolio. Returns on the other properties in the portfolio are continuing to accrue month by month due to the pay down in funding and the leveraged investment in any changes in the
capital value. The returns on these properties will be crystallised and distributed to unitholders as the opportunity presents itself."


Following this announcement the shares increased by 1% (1c) to 1.05.
The options (RRTO) increased by 23%(1.4c) to .075.

[k1w1]

Record Realty has announced that it will pay a tax free distribution of 11.7 cents on its units ( current price $1.05 ) in the quarter ending September 2004. This has the effect of making the units cost effectively 93 cents.

The options cannot be redeemed for units until December - after the distribution occurs so will miss out. They could be purchased at below 3 cents recently making the net cost of a unit 91 cents.

Record Realty will revalue its blue chip office buildings at June 30 and expects that the indicative asset value will increase.

Disclosure: RRTO holder and following options convertion RRT holder.

[k1w1]

Record Realty & Record Investments have announced that their parent company Allco will be floating some new issues soon(see the announcements at RRT or RCD on ASX)

Priority allocations will be given to existing RRT,RCD and RRTO holders. As RCD cost approx $4, RRT about $1.50 and RRT options only 3.3cents it is a no brainer that the RRTO options are the cheapest way to get a priority allocation.

Option price is up 22% to 3.3 cents since the announcement.

[k1w1]

I am claiming bragging rights on this one.

RRT shares closed at $1.20 cum a 12.04 cent mostly tax free return of capital due in a week or two and RRTO options closed at $.10

If you had bought when i bought them and tipped them in June 04then you would be doing all right.

[thereslifeafter87]

k1w1,

You attack Robbo for ramping.....

You are doing exactly what he does.

Don't you see the hypocrisy?

Well done on your profits.

[Capitalist]

The difference is that K1W1 is using the past tense."Has". He is not peddling hope and dreams. And I'm not singling out DavidRob in any way.

[stolwyk]

No need to get involved Capitalist. I am sure those 2 can sort it out.

Gerry

[k1w1]

quote:Originally posted by k1w1

With an up coming distribution to be announced due to a 40% return on a building sale and a distribution on refinancing a lease extension there is a good chance that the current price of options ( 6c, exercise price 1.00) and shares (1.04)will rise.

Hold: RRTO, RCD


TLA when I made this post I disclosed that I was holding. Now that what I predicted happened I am bragging about it. It may not happen again.

I accept that it may be seen as ramping and people can post that view on this thread as you have. To the best of my recall I have never accused Gerry of ramping. My concerns about david robbo are not simply whether he ramps or not. Note that I don't claim to have heard anything from the inside, or have any contacts in the media that can make it fly. Everything I know is publicly available or the result of my reasoning.No special knowledge claimed.

Also if you check the ASX site you will see that I have not entered three or more stocks at a time with no disclosure as to whether I hold
at time of posting.

Thanks for your congratulations.

Please note that no animals or smilies were harmed in making this post.

[k1w1]

Options have gone to 10.4c and head price back to 1.20 after 12.4c tax free payment on news of a rights issue at .85 cents to fund expansion and repay debt.

[soulman]

This totally sucks....
Why are RCD going up so much. I know they are sub. holder of RRT but this is not good. At least wait till I got in.

I had RCD as a buy at around the $5.00 mark but want to wait till early DEC to buy. I thought they might stick around that price until DEC. Now it's gone. I hope it drop down to the $5.00 mark again in the next few weeks.

[soulman]

Well done on those that purchase RCD.

It was a clear sign to buy RCD when they release their Sept Quarterly Update. I just heard of them after their AGM and found out I have been missing out on a true great coy. This coy is similar to CIY in a way except that they are a very diversified business and CIY only focus on the property industry.

This thread would have been very valuable.

[soulman]

k1w1 and others...

Anyone know why RCD has been going down.....It's not because of RRT SP I hope. Obviously it would come down after the ex rights.

RCD went up to $5.50 only to get smash back to their original price of a week ago. I screw up because I bought RCD at a higher price than todays close price. My prediction came true but I bought it at higher than the $5 mark. Damn. Should have trust my instinct.

So RCD was only going up heavy last week because of RRT. That sucks. I supposed they would get nearly $1 mil distribution from their holding of RRT.

[k1w1]

Soulman,
I am not sure that the cause and effect is that clear.RCD as a substantial holder is going to have to pay quite a bit of cash todouble its share holding by exercise of its rights at 85c. That would put some off. I know that the RRT price is down as holders sell down to fund their rights purchases. Maybe some are selling RCD as well.

Then again stocks do go up and down and timing the entry point is as much luck as anything else. I think that in the medium term you wont give a monkeys about the entry price. RCD are a good company to be in.

The price is high for RCD and AHU at the moment. In my view the value in the short term in this group of companies may be RRTR rights which were as low as 8c yesterday and get you into RRT for 93 cents. I am taking up my rights. If you dont have spare cash at the moment then RRTO options are a better bet. They get you into RRT at 85 cents but dont have to be paid up now and are valid until Jun 2005.

I was going to post my thoughts on all this earlier, sorry that I didnt get to you before you purchased. I dont think it will matter in the long term. They are a very savvy outfit.

Disc. Hold RRT, RRTO, RRTR, RCD, AHU

[soulman]

I guess maybe they think RCD was also going to announce a right issue as well and that's the reason for that sharp rally. Well, profit taker sold it down straight away.

There is a strong chance that RCD would make another capital raising next year. It would have been prudent to wait if the SP rally was for that reason only.

I guess they would have to splash out another $13 mil for the RRTR but RRT is a good investment with good distribution.

[k1w1]

Allco Finance the parent body and manager of RCD and RRTO has just asked for a trading halt on its AHU/AHUT listed entities pending an announcement.

Allco's private equity arm, AEP is about to list in what may be the next Bab****and Brown or Macquarie Bank type listing.

Stay tuned.

Disc. Hold, RCD, RRT, RRTO, RRTR, AHU

[soulman]

Just wondering kiwi, how many AHU did you get in the float because there weren't a lot to go around.

[k1w1]

Soulman I got no AHU on the float as I am not an Australian resident but I purchased on market. The share price is up over 250% from what I paid.

Anyway, your RCD purchase has paid off you have a priority entitlement to the hot AEP float provided you are an Aussie resident.

[soulman]

Yes it has kiwi....Lucky I didn't sell out. I was thinking of averaging down when RCD came down to $5 last week but didn't have enough funds.

A good day for RCD shareholders and I think with more to come. Allco has increased it's shareholding in RCD that would inject more funds in RCD for more growth opportunities.

What implication would the chairman stepping down be on RCD?

Will be watching the AEP prospectus.

[soulman]

kiwi, why can't NZ resident apply for the AHU float?

[k1w1]

Same problem as AHU. If you go to see CSFB site prospectus makes it clear that the offer is only to shareholders with a registered address in Australia.

[soulman]

kiwi, What is with the AHU? You would know more than me. What is their profit history and div. policy?

[k1w1]

Soulman, Allco Finance is not a listed company so does not publish its profit or dividend history. It is seen as similar in type to Macquarie Bank and Bab****and Brown. AHU is one of its businesses. It operates in IT Finance with 40% of the Australian market. RRT and RCD are other subsidaries. They are well regarded in Australian financial circles as smart operators who make money.

Here is an article on Allco Finance boss David Coe.


28 November 2004

Abstract art helps finance chief
Robert Clow
November 29, 2004
ABSTRACT expressionism is not everyone's cup of tea. Faced by Jackson Pollock's seemingly random flicks and swirls of paint or Mark Rothko's fuzzy bordered rectangles, many people switch off.

But David Coe becomes inspired.

"Till then, every attempt at art had an element of realism," says the financier, art lover, sports enthusiast, linguist, pianist and all-round renaissance man.

"Those guys were painting the soul. There's a collective spirituality about them."

You may disagree, but that is not going to worry Coe.

He revels in the fact that, regardless of whether his employees love or hate the post-modernist art festooning the walls of Allco Finance's cramped Sydney office, everybody has an opinion about it.

Human resources professionals will tell you that 80 per cent of employees want to be told what to do, says Coe.

"I don't have one person at Allco who wants to be told what to do."

Structured finance company Allco is determinedly nonconformist because Coe believes creativity is the firm's stock in trade.

"Don't assume because that's the way (something) has always been done, that is the way it has got to be done," Coe tells employees. "We really cultivate that."

That same search for creativity links Coe's numerous artistic and sporting interests to Allco's arcane but highly lucrative world.

Coe was ranked as Australia's 155th richest man by Business Review Weekly last May, which guesstimated his net worth at $141 million.

But in addition to his highly successful business life, Coe, 42, who is married with three children, also chairs Sydney's Museum of Contemporary Art, is helping organise Australia's contribution to the Venice Biennale and through Sports & Entertainment Ltd, which he chairs and co-owns, he is involved in presenting the hit Broadway musical The Producers in Melbourne and the musical Hairspray in New York.

SEL is also a 25 per cent shareholder in Avesco, which runs V8 supercar competitions in Australia, and a marketing consultant to the Australian Cricketers Association.

Coe's interests don't stop there. He is also on the board of the Queensland Treasury Corp, local hedge fund Rubicon Management and the Sydney Children's Hospital Foundation and is a member of the Tate International Council.

"The creative spark comes from being forced to be intellectually agile," says Coe.

"The multi-dimensionality of life is a wonderful thing. It encourages people to think out of the square."

Coe started his career as a lawyer at Mallesons Stephen Jaques. But he attributes his own multi-dimensionality to not remaining a lawyer too long. Four years after he started to practise he had moved on to finance at Allco.

Law teaches focused linear thinking, how to get from A to B with the minimum of fuss, Coe explains. But it is less good at teaching lateral thinking.

Coe aims to think – and looks for his employees to think – linearly and laterally.

Coe did not always head Allco. Initially he worked for founder John Kinghorn, a man whom Coe describes as one of the brightest and most talented financiers he has ever known. Kinghorn went on to set up non-bank mortgage lender Rams Home Loans and equipment financing company Rentworks (which he later sold to Allco). BRW estimates his fortune at $207 million.

Coe was fortunate, not just in finding a great mentor, but also in getting into a fast-growing area of finance – leveraged leasing.

A leveraged lease typically involves the user of a large asset, let

[soulman]

RCD - Quite a fall the last few days.

Probably just profit taking and entitlement to the new AEP float ending.

[k1w1]

RRTO update

RRT has just successfully completed a rights issue at 85 cents and has used the funds to retire debt and purchase two further A grade office buildings in Melbourne and Chatswood Sydney. Having dropped in price as low as 89c it is now back at 94 c today. A 2 % increase in value.
The trust holds blue chip commercial real estate in various Australian cities.

The options , exercisable in June 2005, at 85 cents sold for 8c today.
They are already in the money. For every cent that the head share rises before June 2005 they will increase in value over 12% at their current price.

Disc: Holding RRTO, RRT.

[mark100]

Yes kiwi, RRTO offer some really good leverage. I purchased a small amount at 6.1c a few weeks ago.

mark

[k1w1]

Was that you that got them at 6.1, Mark 100. Brilliant trade.

[mark100]

yeah kiwi, that was me. Would have liked a few more and was hoping they would fall below 6 but it never happened.

mark

[k1w1]

What I don't understand is why bidders for RRT at 93c dont simply buy the RRTO option for 8c. As the strike price is 85c they don't lose and can either hold onto more of their cash or buy more options which have
a higher percentage increase in value than the head share for every cent that the SP increases.

[k1w1]

Today there are 25000 options on sale at 8c. The head shares are at 95c and the strike price is 85c. Good leverage.

[mark100]

Looks like they took the 9c seller too!

[k1w1]

Mark100 they just did the maths, at 9c the cost of a share is still only 94c.

As they currently are trading at 96c you could purchase the options at 10c and still be in the money.

With a 50% increase in value your buy at 6.1 cents is looking pretty flash.How long ago was that ?

[mark100]

kiwi,
24 Dec I got some. Shares only have to increase 5% to reach a dollar and at that point the options will be worth 15c.

mark

[k1w1]

Shares at 96 c up 2c . Options at 9c are already in the money by 2c with more to come.

[soulman]

I thought people might want the stag and the SP will hang around the SPP price of 85-89 cents since it was a 1 for 1 issue.

You got your rights Kiwi?

[k1w1]

Didnt need my rights Soulman, have plenty of options from way back, so sold them.

I did wonder about stagging by rights holders also. There was some initially but I have watched the SP steadily increase by a cent or two each day. Today is no exception. It is up to 95 c which covers the option holders who bought at 9c.

If it goes up another cent or two then buyers will take out the other option sellers under 11 cents.

[k1w1]

With the head shares at 96c why are people buying them ? They can buy the options at 8.9c and hold onto their money until Jun 2005 when they will pay an all up cost of 94c per share.

[k1w1]

Still see these options as better value than the SP even though it is in an uptrend.



Today SP at 98c which makes the options worth 13c. Why not buy the options at 9c, bank the other 89c and on current prices make over 40% on your purchase when you convert the options.

[k1w1]

Exactly same position again today with in the money options at 9c already 5c cheaper than buying the share. Good value.

[soulman]

There is a problem with all this kiwi.

It all depend on the exercise time for these option. Do you know the expiry date?

Lets say someone bought 30,000 RRTO, it will take them at least another $25K to convert them to RRT, which most ordinary investor would not have on hand. It all depends on how close the expiry date on the options. Regardless, I know you can buy the options and sell them on-market but lets say there is no taker for these options for the same reason I mentioned above.

Did you enjoy RCD rise the last couple of days? Maybe there is more capital raising coming and the half yearly result as well. I think Allco $5.25 placement for FEB 05 is alright but the next in Sept should changed to something higher like $5.85.

[k1w1]

Soulman, interesting points as always.

Firstly big ups to the bruvvers at RCD for an increase in SP of over 100%. At least a flightless birds shares can fly.

Now to your main point about the RRTO options. The final conversion date is Jun 2005 - still some months away. This month the options have increased in value by nearly 50%.However I have not been targeting this as the basis to purchase.

The more cautious approach is to buy only those options that you can affort to convert in June 2005. This is my thinking :

At 85c per option the cost of conversion comes to AUD 8.5k per 10,000 options. You can arrange a temporary loan facility to cover this.

20,000 RRTO options currently costs AUD $1800.00. If the SP in June is less than 94 c therefore the total loss by not exercising the option is $1800.00 plus brokerage.

The breakeven price for the shares is 94c in Jun 2006.

For every cent the SP is above 94c you make an 11% return on your option less the interest charges on the short term finance and brokerage. Currently the SP is 98 c. If it increases by only 2c to $1 by Jun 2006 then the return would be in excess of 60% for a 6 month investment.

If you sell RRT after converting your options at $1.00 you make $1200.00 less brokerage and interest costs.

The cost of the investment is $1800.00 today plus the interest costs on short term borrowings of $20000 plus two lots of brokerage. The total amount at risk for this return is $1800.00. It is assumed that you have access to 20K loan finance.

I have not factored in any potential upside due to being able to sell the options prior to Jun 2005 as they are less liquid than the shares.

This is not advice. Do your own research.

[soulman]

Good point kiwi,

Is the expiry date in Jun 05 or 06. If it's 06, I might give it a bash. I mean Mark did get his for 6.1 cents.

The exercise price I have here is 85.59 cents so they are not 85 cents.

[k1w1]

Thought I would revisit this thread.

Firstly Major believes that the Board & Management of CIY is better than that of RCD. Floor is yours, Major. Please explain.

Secondly I argued that RCD and associates is a less risky finance company than CIY due to diversification of risk. That is just a plain and simple fact.It is useful in terms of balance to have an opposite point of view on companies. However I need to make it clear that I think CIY is a bargain, I have invested in it in the past and I may do so in the future. That being said, at present my Aussie finance company of choice remains RCD.

Next, shortly we will be able to test the proposition that good news comes out early and bad news comes out late.

The 1/2 yearly accounts for RRT are released in late Feb. In 2003 they came out on 27 Feb.In 2004, a good year, they came out on 17 Feb. In 2005 they will be released on 15 Feb !

If you subscribe to this proposition then RRT options (RRTO) are currently lying in the doldrums, as is RRT over the last few weeks, and may change nearing the release date.

[k1w1]

[quote]Another record for Record
By Lisa Murray
February 10, 2005


The relentless rise of David Coe's Allco Finance Group continued yesterday after its listed investment vehicle, Record Investments, reported a doubling in first-half net profit.

Record's net profit jumped 103 per cent to $22.5 million in the six months to December 31, driven by a series of structured finance deals in the shipping and aircraft markets.

The company was listed in February 2001 and invests largely in operating leases over real assets such as ships, IT equipment, trains and planes. Between 80 and 90 per cent of the deals in which Record invests are sourced by its major shareholder and manager, structured finance specialist Allco.

Record's first-half result pushed shares in the company up 36c to $6.40. The stock has doubled since the start of 2003.

The share price is good news for Allco which announced last November that it would increase its investment in Record from 10 per cent to between 23 and 25 per cent by taking new shares at $5.25 apiece.

If shareholders approve the move at a special meeting in April, Allco is already sitting on a paper profit of $36 million.

An explanatory memorandum on the deal will be sent to shareholders in March including a report from independent expert Grant Samuel.

Record said yesterday the value of investments in shipping, aircraft and pooled loans packaged into securities increased to $505 million in the first half from $413 million at the end of 2003.

The company has investments in 13 shipping vessels and 15 aircraft, leased on a medium to long-term basis to commercial entities.

Allco is confident Record's investment portfolio can increase to $600 million by the end of this year.

"Shipping is an extraordinarily liquid market," said Record chief executive Mark Phillips. "There's been quite hot demand in shipping driven by China's appetite for commodities."

Allco has been behind the listings for Record Investments, Record Realty, Allco Hybrid Investment Trust and the Alleasing Hybrids. Allco Equity Partners, a $550 million private equity fund headed by Peter Yates, listed in late December.
[end quote]

[major]

Hi Kiwi,
Baillieu have a Feb report on RCD for your interest.

[k1w1]

Hi Major,

Are you able to post it or a link to it ?

[major]

www.baillieu.com.au and you should be able to register once there.
You will find it under Reports-February 05

[k1w1]

From the latest Australian Property Review.

Record Realty aims at 15% returns
Adam Parsons
February 16, 2005

While Record Realty announced a $100,000 profit for the six months to 31 December 2004 it reaffirmed its position to provide its investors with greater returns.

Head of Property Funds Management at Record Investments Tony Wood said Record Realty was positioned to give superior returns to investors.

“Our objective is 15% per annum on invested equity over the medium term,” Wood said. “The potential for higher returns is achieved by combining structured finance techniques with higher leverage to enhance the returns from the underlying real estate.”

During the first half, Record Realty made a distribution of 12.04 cents per unit.

Wood said the existing portfolio will benefit from the improving outlook for the office market with sustained investor demand, increasing levels of absorption and escalating development costs all beginning to place upwards pressure on rental and capital values.

Record Realty reported that growth over the period has accelerated with a successful capital raising and a healthy pipeline of suitable opportunities enabling three new investments to be made.

“Following completion of these acquisitions committed equity will have increased by 87% to $124 million.”

The interim net profit of $0.1 million was in line with expectations reflecting the cost of interim financing facilities of $1.6 million.

Reweighting of the investment portfolio from suburban offices to high quality city buildings also diminished profit for the period. Such buildings offer the prospect of higher risk adjusted growth but with relatively low initial rental returns. The benefit of the new weighting is expected to be evident in the growth return when the portfolio is independently valued at 30 June 2005.

“Record Realty is well placed to deliver superior returns over the medium term with distributions expected to occur on approximately an annual basis,” Wood concluded.

During the half year, Record Realty acquired the Myer Megamart centre in Perth and contracted to purchase the Vero Insurance building in Chatswood as well as the Australia Post building in Melbourne. The purchase of the Vero Insurance building was completed in January 2005. The purchase of the Australia Post building will be completed in early March 2005.

Following completion of the above purchases Record Realty’s property portfolio will have increased from $186 million in December 2003 to over $500 million.

Wood said that Record Realty has continued to benefit from its close relationship with Allco Finance Group which has originated and structured all of the investments.

He added that Record Investments has also continued to facilitate the growth of Record Realty by providing interim funding for new investments.

Record Realty has undergone a period of rapid growth with its capitalisation increasing from $54 million to over $100 million in the past 6 months.

Wood explained that to fund this growth Record Realty completed a placement and rights issue raising net proceeds of $55 million in December 2004. Of these proceeds $33 million was used to repay the interim financing facilities referred to above.

He said the balance of $22 million has been used to partly fund Record Realty’s equity investment of $50 million in the Vero Insurance and Australia Post properties. The additional $28 million required to fund the acquisition of these two properties will be funded by re-drawing the interim financing facilities.

“We expect these facilities will be substantially repaid by a further inflow of capital from the exercise of outstanding options in June 2005,” Wood concluded

[k1w1]

RRTO options up 18.5% on half yearly report to 9.5 cents with buyers at that figure and sellers at9.9c.

[soulman]

It's all in the AFR kiwi.

ABN Amro said RRT deserve to trade at a 30% premium to NTA and give it a buy. The fact that you option holder have to fork out 86 cents to exercise the option in June would add another $20 mil to RRT and hence they can be on a prowl for more office purchase spree. That was also mentioned in the AFR.

[k1w1]

Soulman I don't get AFR nor Ambro reports, what exactly did they say?

Stock down 5% to 9c ,but up until the last two trades was up 15% with top price of 11c and average weighted cost per share of 10.1 c.

In the recent past it moves up 1c for every 1 c rise in RRT. Good leverage.

[mark100]

Rcd got hit hard today down to 4.80. Its now down 25% off its high a few months ago and is starting to look ok value.
With EPS and DPS of around 32c expected for 2006, rcd is now on a prospective PE of 15 and yield of 6.6% FF.
Tolhurst Noall has a buy on it and valuation of $6 plus but as we all know, brokers can get a bit optimistic.

mark

[k1w1]

Insto's dont like Allco boys forcing out the independant chairman Tony Berg and putting their own boy David Coe in his place.

Berg was the honest broker who enforced the covenant that Record had first and last options on all deals Allco offered to third parties. As Allco has not much capital of its own, compared to a bank,it has to get other parties involved to make its deals - so that is significant.

Now Allco not only originates all the Record deals, it is the major shareholder and controls the board as well. Berg's head on a plate was the price that Allco required to extend the option expiry date and take up extra capital at $5.25 well below todays shareholding price.

If you rate Allco that makes Record worthy of consideration at current prices esp as it pays out 100% of its profits as dividends.

[SEC]

quote:Originally posted by k1w1

Berg's head on a plate was the price that Allco required to extend the option expiry date and take up extra capital at $5.25 well below todays shareholding price.


Please explain, don't you mean 'well above today's shareholding price'?

Anyway, I was wondering why the big fall today, thanks the the explanation. Looking more similar to your typical Macquarie fund now. Next Allco will be asking for more free scrip in lieu of performance fees and going cap in hand for capital raisings (unless the div payout ratio is reduced).

I was liking the look of RCD too...

SEC

[mark100]

I am aware of the market concerns re board independence, however I can tolerate that given Allco have stumped up $150m cash at a 10% premium to the current sp.
I note Huntleys are forecasting EPS and DPS of 36c for 06 although the average of forecats is around 32c. So assuming they can keep things on track rcd is now on a possible yield of 6.7% FF for 2006 (32c DPS).
I didn't think it would come back this far but now it has I have bought.

mark

[k1w1]

Record Investments as manager of Record Realty RRT has just announced that the NTA will be between .99 and $1.02 with a current SP of 87cents. More importantly a mainly tax free dividend of between 4c and 10 cents will be paid this calendar year !

Those who want a bit of excitement should look at the RRTO options exercisable at 85.6 cents which are currently for sale for 1.9 cents.

Extract from recent announcement :

'Record Realty has 25.3 million options outstanding with an exercise price of $0.8559 per unit. The final exercise period is between 12 and 25 June 2005.

Summary
Record Realty expects to make a further cash distribution prior to 31 December 2005.Whilst still dependent on a range of factors, the distribution is expected to be at least 4 cents per unit and potentially as high as 10 cents per unit. In the main, the distribution willbe a return of capital for taxation purposes.

It is also expected that the net asset backing of the trust as at 30 June 2005 will bebetween $0.99 and $1.02 per unit. The actual outcome will be dependent on the outcome of year end revaluations and the number of options that are exercised.'

[mark100]

Rcd have today upgraded their forecast investment levels.

Previously, the general consensus was for eps around 32c in 2006.
Based on the new numbers I reckon it might be around 37c putting rcd on a ff yield of 6.5% at the current price (its up 7% today).

This is based on average investment levels of $705m for the year yielding an average of 16.2%, along with around $10m in fees and 193m shares on issue.

mark

[soulman]

Mark, did you get RCD cheap. I saw it twice at $4.60. I didn't top up because I bought it last Nov/Dec at more than that. I can't believe it fall that much just because of independence concern. I mean more than 5 mil shares voted against the change and therefore I suspect that those 5 mil shares have to be traded away for the SP to rise again.

I would say that 27 cents DPS for this year and next year, at least 32 cents now since todays announcement. The SP was trading at a discount to Allco placement by more than 10%. I can't believe that. What an opportunity for traders and long term investors there. Also, I see RCD rise when Mac Bank announce their profit result a couple of weeks ago.

[mark100]

soulman,
I got rcd 'cheap' but not super cheap! Paid 4.90 only to see them drop to 4.60 but with the price now at 5.65 I can't complain.

I agree with your DPS number for this year but I am hoping 2006 is a bit above 32c. 32c was the general consensus among the brokers before yesterdays upgrade.

mark

[soulman]

Mark, That is cheaper than my purchase price. I got mine for just under Allco placement.

You just can't time the market these day. I was thinking of buying more at the $4.80's when it got there after the $4.60's, but didn't enact on that opportunities. Furthermore, I was lucky not to sell them when it got to $5.30. I see it move up to the $6.00's mark by August/September this year. I think forecast of 37 cents DPS is achievable but interest expense would affect the profits if the investment grew stronger. Unless another placement to shareholders/Allco again, although there will be more shares on issue.

[k1w1]

Soulman and Mark, I was early on this share and was fortunate to get them at 2.98. But so what, even at todays prices they are a quality share. In my opinion they have a more diversified set of loans, assets and income sources than CIY.

[mark100]

Well if we want to start a competition I first bought rcd on 30 May 2003 at 2.45 and then on 17 April 2003 at 2.65 (and I have CN's to prove it), however I sold at around 3.50 and switched to ciyoa which ended up giving much better returns over the next 12 months. I bought after a tip on hotcopper from a poster called nickoo who I reckon lurks around here under a different name now. Thanks nickoo.

Yes they are a quality company but I will say it again, yes rcd is much more diversified than ciy but it trades at almost a 100% premium to ciy so you are paying for that diversification. I was saying rcd was too expensive when it was over $6 but when it fell below $5 it become good value.

Today Tolhurst and Noall revised their 2006 forecasts for rcd. Now forecasting EPS/DPS of 34c up from 32c although they point out that all the extra business is funding for related parties, significantly increasing the risk. They also speculate that Allco will eventually be backed in rcd to create a mini Bab****and Brown although I see in todays AFR CSFB reckon rcd will spin off their shipping leases into a separately listed fund late this year or early next year.

mark

[k1w1]

Allco's listed private equity fund, AEQCA, has made a play for Baycorp which has caught the markets attention.

A hostile takeover of a poor market performer is the name of this game. In this case the raiders had inside help as five institutional shareholders in BCA sold them shares.

The new management team is going to be smarter and better connected than the existing one.

[soulman]

Look it here....Brilliant!!!...

I was expecting less than this but fees income boost RCD result to a stand still and dividend of 17 cents PS is just too nice...

Those institutions that sold out and force the SP to drop in the $4.60' must now ponder - WHY did they do it?

It cause me nervousness but in hindsight now I should have add more at the $460 to $500 mark but instead I just stood at the sideline. However they did present opportunities for investors like Mark and others.

[mark100]

Yep, very happy with the result. The fees also exceeded my expectations. Looks promising for next year.

Cheers
Mark

[k1w1]

Put these shares safely in the bottom draw.

[mark100]

Yes kiwi, they are worth holding onto. A bit expensive now but the trend is your friend I suppose.

Here is a recent snippet from Tolhurst Noall for those interested. The future fund management fees combined with potential gains on the expiry of leases (like the recent ship sale) should keep the earnings growing nicely.

Also I note Huntleys (who already had the most bullish forecats) are now forecasting FY06 EPS of 40.8c and FY07 EPS of 48.7c.

Record Investments (RCD)
Share Price: $6.98 Market Capitalisation: $1.4bn
Recommendation: Buy
Risk Rating: High
Analyst: Nick Maclean
Event: Company Update

Record Investments (RCD) continues to power ahead with its share price hitting all time highs. As such we provide the following note as a prelude to the company’s investment update to be provided in the first week of October:
• We reaffirm our estimate for a Calender Year end investment balance approaching $700m and a FY 06E investment balance of $789m. This is premised on total borrowings of $250m – down from $340m in the pcp
• We are forecasting FY 06E NPAT of $70.8m with an average investment yield of 15.8% - up from 15.3% in the pcp. This equates to EPS of $0.392 and DPS of $0.388.

While this growth is pleasing, we reiterate our long held view that FY 07 will start to see some significant earnings acceleration on an absolute level. This relates to the maturity of some of RCD’s early, larger scale investments which will begin expiring in FY 07. As we saw with the recent ship sale, the upside from this lease expiration could be substantial. For example, RCD accrues its earnings at approximately 15-16% despite a base case targeted IRR of 20%. We also note the IRR from the recent ship sale was 60%+!

In addition to this earnings potential we see - assuming economic conditions remain stable - we believe the next stage of significant medium term growth for RCD will actually come from outside its current core areas. In particular, we refer to RCD’s funds management activities and its relationship with Allco.

While RCD’s funds management activities are not new to the business, its structure has changed – as referred to in previous notes. RCD now collects 25% of gross management fees from Allco’s funds management vehicles (excluding RRT where RCD collects 75% and Allco 25% - Allco now manages). RCD will continue, to look at providing seed equity for the creation of funds management ventures.

While the details are not available, we are particularly excited about Allco’s potential funds management ventures in Asia. For example, the creation of funds which house Chinese infrastructure assets - such as Port and/or road assets. We can see RCD providing the seed capital to establish these funds, exiting via an IPO. RCD will then continue to benefit from its 25% share of gross management fees via Allco managing the fund itself.

So RCD receives upside via its equity funding and subsequent yield returns, diversified investment base and longer term annuity style gross management fees.

We believe that success in this area will provide the catalyst for a further upward re-rating of RCD.

[k1w1]

Interesting announcement that Record Investments is in preliminary discussions with unlisted Allco Finance Ltd regarding a possible merger.

Allco is the largest RCD shareholder and the originator of many of its deals.

Share price up 7% on the announcement so far the market approves

[mark100]

Yes kiwi, this has been speculated for a while. Very positive in my view. Transforms rcd from a finance company to an Investment Bank.

Mark

[k1w1]

mark100, I would be interested in your views on the little traded AHU.AX. This is a trust that Allco Finance runs that issued hybrid listed securities AHUG and AHUGA.

By my reckoning AHU, with approx $150 million of funds raised, purchased 33,597,134 shares in RCD (17.4%) at 5.25 per share.
At present RCD is trading at 7.80 per share giving a profit of $2.55 per share on 33.5 million shares.

Again I estimate this as a profit of $85 million on an investment of $150 million - giving a 57% increase in value . This is significant amount given that the trust has total funds of $387 million spread over a range of investments.

RCD is at present in merger talks with Allco Finance. As Allco is an 88 % majority shareholder in AHU this could be a very interesting share to follow in the next few weeks. I am a long term holder who has topped up in the last few weeks.

Disclosure. The writer has always believed that RCD is a better finance company to be invested in than CIY and has acted on that belief.

[mark100]

Hi kiwi,

I'll try and ignore your smart **** comment on ciy. If its makes you feel any better my rcd holding is currently larger than my ciy holding.

The rcd share price looks strectched now in my opinion however the potential upside from this merger means I am not selling. I will wait and see what the merger documents have to say.

The AFR recently speculated that Allco wasn't as profitable as some may expect and may have only earned around $5 - $13m last year. This is good imo as it means rcd will not have to pay as much for Allco yet it will benefit from 100% of potential fund management fees.

A negative is I can't see rcd maintaining its 100% payout ratio after the merger.

Regarding AHU, this stock has had me interested for a while although I don't hold.

First thing to note - With the funds raised from the AHUGA issue, AHU invested in 'The Principals Trust', not RCD. The Princiapls Trust then invested in Rcd. So it is the Principals Trust that is sitting on the paper profit.

In the prospectus for AHUGA, it is stated that the Principals Trust has provided a 25% profit share with AHU of which 1/5 of the 25% goes to AHUGA holders with AHU getting the rest. So in summary, AHU is only entitled to 20% of the paper profits.

As you say the paper profits are now around $85m. So based on my research it appears AHU is only entitled to $17m of this (or 1.50 per AHU security).

I have copied a post from DanMc on sharesguru for your info:

"I spoke to Andrew Rutherford from Allco this morning, and he told me that the proposed Allco-Record merger will have no immediate effect on AHUG and AHUGA. This seems fair enough for AHUG, which is related to a group of leasing businesses (Alleasing) and has no direct link to RCD, though I was a little surprised that there will be no impact on AHUGA, given that it is backed by an Allco investment in RCD shares (AHUGA was used to fund those 2 recent tranches of RCD shares that Allco subscribed for at $5.25). Andrew told me that a Record-Allco merger will not trigger a conversion of the AHUGA hybrids, and that the likelihood of a Principals Trust IPO is now smaller than it was prior to the Allco-RCD merger talks. So the most likely trigger for AHUGA will be the reset date (June 0 or the maturity date (Dec 2010).

I understand that AHUG will be converted/redeemed upon the IPO of Alleasing, which is scheduled to happen by the end of 2007. There is a useful presentation released by AHU to the ASX on 07/04/05 which gives more detail here. AHUG holders should be able to convert at least some of their hybrids into Alleasing shares when the IPO occurs, which could potentially produce a stag profit in a float which I imagine will be tough to get an allocation for.

I have also spoken to Allco previously about AHU and its business. The lady I spoke to (I can't recall her name) implied that Allco was somewhat surprised by the strength of the AHU share price, given that forecasting its profits are nearly impossible, and when AHUG and AHUGA convert, there will be no ongoing business activity for AHU, unless more hybrids are issued in the future (which I understand Allco are planning to do). So buying AHU appears to a punt on Allco's ability to continue issuing new sets of hybrids on a fairly regular basis.

I have invested in AHUG and AHUGA because I see them as high returning, tax effective fixed income investments with a possible "kicker" from an AHUG IPO conversion and a Principal's Trust profit share for AHUGA. The investments supporting these hybrids appear to be sound, so I see risk as being reasonable.

Please note this is just my opinion and not to be taken as investment advice, though I am very interested to hear other people's views!"


Kiwi, based on DanMc's and my own research I can't see how AHU can continue to trade at $7 - $8 however I could be wrong. The market obviously thinks differently as it pushed up AHU on the rcd/Allco merger annoucement.

Cheers
Mark

[k1w1]

Hi Mark,

I accept that my CIY comment was a bit provocative.

Just quickly to see if I have this right.

AHU issued AHUGA debentures to the public.AHUGA has A$250 million of debt securities ( cf AHUG $124.5 mill)

AHU, which is 88% owned by Allco Finance, used $176 million of proceeds to buy 256,250,000 preference units in Allco Principals Trust paying 14.53% interest.

The value of each preference unit is to increase from the issue price to $1.00 in 3.5 years at which time the preference units may be transferred to the holders of the PoD hybrids or may be redeemed for shares held in Record Investments Limited.

In April 2005 Record Investment shareholders approved the issue of 30 million new shares at $5.25 to Allco Principals Investments Pty Ltd as nominee for Allco Principals Trust. The trust was described in the Chairmans Address as being " owned beneficially by Allco Finance Ltd and its shareholders" thereby increasing its shareholding in Record from 9 % to 24.7 %.

In addition Allco Record Unit Trust which holds Allco Finance's existing RCD shares had an option to acquire further shares up to 11% of the new shares issued at a price of $5.77 per share.

On 21 Sept 2005 David Coe of Allco, a substantial holder in Record, filed a change in relevant interest, stating that his 23.7% interest
in Record Investments was held as to 17.4 %( 33.5 million shares) on behalf of Allco Principals Investments Pty Ltd as nominee for Allco Principals Trust.

On 21 Sept 2005 Nicolas Bain of Allco, a substantial holder in Record, filed a change in relevant interest, stating that his 22.9% interest in Record Investments was held as to 17.4 %( 33.5 million shares) on behalf of Allco Principals Investments Pty Ltd as nominee for Allco Principals Trust.

On 21 Sept 2005 Allco Finance Group Ltd , a substantial holder in Record, filed a change in relevant interest, stating that its 22.87% interest in Record Investments was held as to 17.4 %( 33.5 million shares) on behalf of Allco Principals Investments Pty Ltd as nominee for Allco Principals Trust.

It appears then that from the notices filed the three substantial shareholders in Record Investments Ltd that are associated with Allco Finance now hold 69% of the shares in the company. Of those shares Allco Principals Trust holds 52.2% amounting to just over 100 million shares in RCD, with a current value of approx $750 million.

What I cant be sure of is what % of the units in the Trust are owned by AHU or what % of the assets of the trust the Record shares are.

[mark100]

kiwi, I'll get back to you on this. Allco sure know how to make things confusing so I'll have to do a few more checks.

Mark

[k1w1]

Mark, upon reviewing this with a bit more time, my present view is that the total interest of all Allco Finance Ltd related parties in RCD is the 23.7% referred to by David Coe.

Of that amount some 17.4% (33.5 million shares) is held beneficially by the Principals Trust. This trust has ordinary units owned by Allco Finance Principals, I would guesstimate them at around 2 million units as that was the amount of total cash assets of Principals Trust prior to the issue of A$250,000.00 worth of AHUGA securities as per the AHUGA prospectus.

AHU purchased 256 million preferred units in the Trust for $167 million dollars at 66 cents. $167 million is close to the cost of 30 million RCD shares at $5.25 . $256 million is the value of the preferred units that AHU has been promised in 3.5 years which equates to the original amount of AHUGA securities that is owed to hybrid security holders.

As you say, AHU gets 25% of the profits on the 30 million RCD shares purchased ( of which 5% go to AHUGA holders leaving them 20%)and a capital protection guarantee from Principals Trust, which in turn gets 75% of the profits on the shares.

AHU ,itself 88% owned by Allco Finance, thus owns 256 million of the 258 million units in the Principals Trust, the owner of 17.5% shares in RCD.

Principals Trust can convert these preference units, either in 3.5 years or in 6 years at maturity or if it has an IPO into conversion securities. Upon conversion each POD hybrid holder recieves 102.5 Principals Trust units per $100 invested ( thats why there are 256 million of them being the amount originally raised )plus a 5% cash distribution of the profits to date. These conversion securities will either be listed on the ASX, ie there is an IPO, or issued in already listed RCD shares at .125 RCD shares per unit or 12.81 shares per $100 invested or 1 share for every $7.80 invested ( in addition holders receive 5% of the profits plus annual interest of 9% (tax free for 3.5 years) per annum per $100 invested , plus capital protection guarantee)

I calculate these figures based on the following:

When the preferred units convert, there will be 264,656,250 Principals Trust Units which hold 33,500,000 RCD shares( or .125 RCD per conversion unit.)

The Principals Trust will have made a profit of $67.6 million on the difference between the cost of the RCD shares,($5.25 approx) and the conversion price of the preference units into RCD shares ($7.80)(which I calculate at .125 of an RCD share per unit x 102.5 units per $100 invested or 12.81 RCD shares received for every $100 invested or $7.80 per RCD share) .

It will distribute 5 % of the profit in cash to AHUGA investors, 20% to AHU, and I assume the remainder will accrue to the unit holders in Principals Trust.

If AHU receives 20% of the profits on the RCD shares purchased , this amount I currently estimate at $13.52 million . This is not in itself, a large amount. However according to the HIT concise report, AHU has 11 million units, so dividing that profit would mean that , based on these figures, each unit is currently sitting on a profit of $1.22 per unit on this transaction. In addition AHU has other transactions such as its smaller Alleasing Trust investment.

[dantmcc]

k1w1, AHU has 11.3M units - 1.3M units issued to the public and Allco has 10M units (88% of 11.3M units), so the value of $13.5M per unit is around $1.20.

[k1w1]

Thanks dantmcc, the value of peer review.

I have amended the post accordingly - it did seem a bit good to be true.

[mark100]

Wow, just charged through $8. I'm anxiously awaiting the Information Memorandum due late this month.

I see the new AFR Smart Investor mag listed Rcd as one of 10 stocks it tipped to double in 5 years. I think maybe more like 2 years. kiwi, you will pleased to hear they also tipped mfs.

Mark

[k1w1]

Mark100,

what are your thoughts on AHUGA as a tax efficient way for NZ'ers
to be exposed to RCD ?

[k1w1]

Welcome to The Sydney Morning Herald. Skip directly to: Search Box, Section Navigation, Content. Text Version.
www.smh.com.au

Allco Finance doubles profit

By Lisa Murray
November 23, 2005

David Coe's Allco Finance Group more than doubled its net profit last financial year to $13.9 million as it raked in fees for finding and structuring deals.

The group is looking to merge with its main client, Record Investments, in which it has a 24 per cent stake, to create a financial powerhouse that would compete in the same league as Macquarie Bank and Bab****& Brown.

Director and chief financial officer Michael Stefanovski said the accounts covered a significant part of Allco's operations but did not include all of its offshore and local businesses.

He said the company would release its full financial results in the disclosure document to Record shareholders ahead of their vote on the merger, likely to be early next year.

Mr Coe has kept a relatively low profile during the past 20 years despite being one of the key players in the structured finance and private equity markets. He is also one of the more colourful of Sydney's financiers, with a keen interest in theatre and contemporary art.

His salary is not disclosed in the Allco Finance accounts.

However, the company does reveal that it paid out $4.1 million in dividends for the year to June 30, up from $1.3 million a year earlier.

Allco also substantially increased its provision for staff bonuses to just shy of $10 million, compared to less than $2 million in 2004.

Staff expenses overall almost tripled to $26.3 million. Mr Stefanovski said that was because the business was doing well and the company added 28 staff, taking total employee numbers to 93.

Allco's bumper result follows on from Record's solid numbers released earlier this year. Record listed on the stock exchange in February 2001 and invests largely in operating leases over real assets such as ships, IT equipment, trains and planes. Between 80 and 90 per cent of the deals in which Record invests are sourced by its major shareholder and manager, Allco. Mr Coe is Record's chairman.

Record doubled its full-year net profit to $53 million, beating analyst expectations by 10 per cent. Its share price has jumped 55 per cent in the past year, closing at $8.12 yesterday, with most of the increase coming after Allco and Record announced their intentions to merge.

As a result of the pending changes, Record's well-regarded chief executive, Mark Phillips, announced yesterday he was defecting to Mariner, the financial group set up by former Challenger CEO Bill Ireland.

Allco Finance Group raked in $86 million in "arrangement" fees and $16.6 million in "management and recurring" fees last financial year, according to the accounts lodged with the Australian Securities and Investments Commission late last month.

However, one person close to the company said the profit number for the group would be substantially higher than what was disclosed in the accounts. For example, Allco's profitable UK shipping finance business is not included in those accounts.

[mark100]

kiwi,

On your AHUGA question:

I don't know much about NZ tax laws except that you can't use Australian franking credits.

Now AHUGA pay 9% which is 'tax defferred'. I don't know if the 'tax defferred' element applies to NZ holders.

As a way of getting exposure to RCD, I don't think this will be very profitable. The reason I think this is because on conversion, AHUGA will convert into either 102.5 $1 units in Principals Trust or the equivalent value of rcd shares (ie at a 2.5% discount).

Now since Allco is merging with rcd we have been told that the future listing of Principals Trust is less likely, so its more likely AHUGA will convert into Rcd.

But, by owning AHUGA you don't share in the capital growth of rcd between now and conversion. You only get the 9% return. This is because AHUGA don't convert into a set number of rcd shares but rather a set value of rcd shares (with a 2.5% discount).

Mark

[k1w1]

P 34 & 35 of the Disclosure Document states:

when there is conversion at reset or maturity into Record Investment shares the number of Record Investment shares received will be "equivalent to the market value of 102.5 Preference Units in Principals Trust.

Record Investment shares held by the holder are expected to be worth at least $102.50 for each POD Hybrid originally held."

Mark I read that slightly differently to you. It says 102.5 Preference Units worth at least $102.50. Is that different from saying 102.5 $1 units?

In my view it is. I say you get Record Investment shares equivalent to the market value of 102.5 preference units for every $100 invested rather than record investment shares to the value of $102.50 for every $100 invested.

The Trusts main assets are Record investment shares and dividends. Therefore an increase in value in the Record shares must increase the value of the units in the Principals Trust.

On conversion without an IPO of the Trust (most likely event) then in my view hybrid holders receive Record shares, which have an equivalent value to 102.5 preference units per $100 AHUGA hybrid.

The preference units are expected to be worth at least $102.50, but I think may in fact be worth far more than $102.50, if the Record Shares held by the Principals Trust have increased in value as a result of the merger with Allco Finance.

[mark100]

Sold my remaining rcd this morning, averaged $8.64 overall. Has been a very good run but I'm not comfortable holding a stock on a forward pe of 22. I think the market could get a little ugly early next year.

Macquarie couldn't get their Singapore based real estate trust off the ground this week and this may have impications for Allco's new funds short term?

Mark

[soulman]

Mark, I sold half my holding a week ago at $8.77. I don't hold that much but RCD has treat me well. I should have picked up more at the $4.80's mark in April/May this year and also has a buy order at $6.40 a couple of months ago only to fall short and the next few days shot up due to the Allco merger.

Do you still hold CIY, which has gradually fallen in value day by day? What about MFS or TCI?

[mark100]

Hi soulman,

I still hold ciy although only a quarter of my holding a year ago. I intend to load up on them on public confirmation of a resolution with ASIC. Until then I can't see them going far. Very unlikely that I'll sell the rest given their low pe and high yield.

I no longer hold tci and only ever traded mfs a few times, never held it long term.

I'm not negative on the rcd or Allco business, I just think they have got very expensive and are prone to a market correction. I'll look to get back in at lower prices.

My current shares are:
aza, aoco, bnt, bnto, ciy, cpko, gbt, ipm, mgx, nhe, psa and xte (which has turned into a problem). Subject to change on a daily basis. Through aza, cpco, ipm, psa and possibly nhe, I'm quite heavily weighted towards oil and gas at present.

Cheers
Mark

[k1w1]

Hi Mark and Soulman,

As the last RCD shareholder standing on this site I suppose it will fall to me to extinguish the lights when I leave.

I purchased RCD for $2.98 guided by an Aspect Huntley recommendation as I remember. I am not skilled at TA and charting although this site has sparked my interest in them. Mostly I am just someone who buys a small part ownership of a business I perceive as having a future. I get what RCD is trying to do, and MFS as well. So I bought shares in their business.

I lack confidence in my trading skills, I have sold and regretted more often than not. The only times I have not regretted it is where I have formed a negative view of the moral character of the people behind an outfit.Over the years I have found that my greatest gains have come from buying and holding, not from trading. Others may have a different experience.

I intend to hold for the long term and accept that at times the market will mark down their share prices, maybe this year.

[SEC]

Kiwi, you are not the last RCD shareholder on this site.

RCD cannot be properly compared on forward PE because it pays out ~100% in dividends. A better comparison is yield, which at ~4.5% fully franked is still very adequate and compares well against other finance related stocks.

As for TA, RCD is still in a 3 year long uptrend and there's no sign of it breaking that trend anytime soon.

As for 2006, I would rather be holding RCD than some speculative oil and gas explorers if the market gets ugly.

SEC

[mark100]

I didn't say I won't be back in. I love the rcd business model.

And yes SEC, the yield is still ok. However will they maintain the 100% payout after the Allco merger? I am thinking they will look to retain some earnings. All will be revealed in Jan/Feb I suppose.

SEC, I think you misunderstood my post. I didn't say oil and gas would be good performers in an ugly market. I just think they will be reasonable performers during the northern winter. They can't be compared with rcd in any way.

Cheers
Mark

[SEC]

RCD/Allco can drop the % payout significantly and still compare favourably with the likes of MBL and BNB. MBL's forward PE is 17 with a yield of 3.2%, BNB's PE is 24/yield 1.6%. And don't forget to include Allco's forecast earnings, whatever that is.

SEC

[mark100]

Rcd will issue shares to acquire Allco. Whether those earnings are EPS accreditive or dilutive is something we don't know yet. Its likely that it will be neutral in year 1.

Mark

[soulman]

OK, judging by today's action, I wished I sold out of RCD completely instead of half. Then I might be able to buy them back when things and sentinment are clearer.

The reason why I sold RCD is because I thought the SP were too ahead of themselves (just like what Mark did) but I do not want to missed out if they crashed through the $10.00 mark after I sold. This turn out to be not the case and it will be a while before that happens. Oh, how I wished I sold the lot.

I am not performing great in this market ATM. TLS and AIHCA is causing me problems. IAG was causing me problems, although in the past 5 trading days, they are on an upwards straight line. God bless them. I can't believe I bought Monadelphous for $9.31 just February this year and they are specifically $18.80 today for the 4 to 1 split. I sold out of that one for $10.00 in the Apr/May market correction. Oh well!!

[soulman]

RCD is really getting a hit in the last few trading days. The downside from all these deal is that current CEO Mark Philips will stand down.

I attribute these down days mostly to profit taking.

[mark100]

It might be coming good again soulman. It dropped much quicker than I expected. Anyway, I'm back in at 7.89 average.

Mark

[mark100]

Over the past few days sellers have outnumbered buyers 2 to 1 on rcd. And this morning it was more like 3 to 1. Now at close of trade this arvo buyers outnumber sellers 1.6 to 1 despite the nervous market.

News on the Allco merger and interim results is due in Feb. The increase in the buy depth today indicates that good news may not be far off?

Also on the topice of the Allco merger, I was talking to a broker a few weeks back who was saying buy as many AXQO's as possible (when they were 4c). AXQ is the Allco Max Mortgage Trust. He reckons that the Allco merger will have significant positive implications for AXQ.

In its present state, AXQ is just a boring trust with NTA of 90c. It was trading at just over $1 last week and the otions were 4c ($1 exercise price). Then in the space of 2 days AXQ rose to $1.08 and the options doubled to 8c.

Unfortunately I wasn't fast enough to get any AXQO's but this movement may mean news on the merger will be out very soon.

Cheers
Mark

[mark100]

Maybe not. Buyers looking thin again today

[soulman]

Quite a jump today for RCD. The half yearly announcement is due in early Feb, maybe along with the planned merger. BNB took a hit though in that sector, most likely due to brokers downgrade.

[mark100]

soulman,

I see rcd got a mention in today's AFR. Apparently the merger has been delayed again due to 'strong deal flow of the businesses and complications associated with new accounting standards'.

Macquarie reckons the combined entity should get a higher market rating than it is achieving now. The AFR also had a table that reckoned Rcd was trading at a 11%, 12% and 14% to the sector average PE for years 2006, 2007 and 2008 respectively.

cheers

[soulman]

Yes Mark, I read that AFR section as well. It seems even Mac Bank said that the combined entities will have a bargaining power against their deal flows. Hence, more competition. The sad thing for RCD shareholders though is the departure CEO Mark Phillips on the merge.

AFR state RCD to report next Monday. Not sure though, as on their website, it's 9th of Feb.

[mark100]

soulman,

I've also read on another site that Tuesday is the results day! At least they all agree on the week.

Also see my thread on mfi to see what Mark Phillips is doing post rcd. I don't have any mfi but they will be worth watching in the future.

cheers

[mark100]

Just received confirmation that RCD will release their results after market close today.

I would like to see a result of over $35m but that may be a bit opimisitic. My very rough calcs are:

Avg investments for half year: $780m
Avg annual return on investments: 15.5%
Half year return on investments: $60.5m
Fees earned: $2.5m
EBIT margin: 93% (in line with historical figures)
EBIT: $58.5m
Less interest: $8m
Less tax @ 30%
NPAT: $36m (EPS 19c)

Comments welcome

[soulman]

Mark, not sure about that one. RCD usually released their result first thing in the morning. Maybe they will hand over their result to the ASX after the close today and ASX will release them tomorrow morning.

[soulman]

Also, what about the profits from the shipping vessel sold during the DEC QTR?

[mark100]

soulman,

Maybe it will be released tomorrow morning. My contact at rcd simply said in his email "The results will be released after close of market today".

I didn't include the profit from the ship sale. But I used a slightly higher ROI than historical and I may have underestimated the interest cost. As I said, 'very rough' estimate.

cheers

[SEC]

quote:Originally posted by mark100

Just received confirmation that RCD will release their results after market close today.

I would like to see a result of over $35m but that may be a bit opimisitic. My very rough calcs are:

Avg investments for half year: $780m
Avg annual return on investments: 15.5%
Half year return on investments: $60.5m
Fees earned: $2.5m
EBIT margin: 93% (in line with historical figures)
EBIT: $58.5m
Less interest: $8m
Less tax @ 30%
NPAT: $36m (EPS 19c)

Comments welcome


From memory, today's AFR stated broker consensus NPAT estimate of $40M for RCD, it may include the ship sale. You're in the right ball park though, and anything over $40M will be favourably recieved.

SEC

[mark100]

Thanks SEC, I didn't get today's AFR. $40m would be good. The most bullish FY06 figure I have seen is from Huntleys. They are estimating NPAT of $78.8m. A $40m half year would put them well on the way to beating that. Of course the merger plan will most likely change the full year estimates.

cheers

[mark100]

Well that was an impressive result. In the Sept quarter update they were targeting investments levels of over $650m in Dec 05. Instead they ended up with $955m. ANd they reckon the pipeline of deals is still strong.

An interesting point to note: Mark Phillips is stepping down on 17 Feb. As I have pointed out on the MFI thread, he is moving to Mariner Financial an emerging fund manager and financial services company. In Rcd's commentry today they noted that some of the real estate investments were in loans to Mariner Financial. I take this to mean RCD and MFI may have some sort of working relationship going forward. This should benefit MFI given they are still ramping up their business.

[soulman]

Impressive and unexpected, at least for me. The surge in RCD SP might suggest that yesterday. A bit of insider trading there too.

Dissapointed that I didn't buy RCD when they were hovering around $8.00 for the last month or so. Mark Phillips resignation, as flagged before also signal that the merger is close. RCD should be in the class of BNB and MBL soon.

[k1w1]

Also impressive is RRT, also on this thread, who are paying a tax free dividend of 12c per share with a current share price of $1.00. Those who exercised their options at 85c are having a good year.

[soulman]

RCD opened at $9.36 and closed lower. I really don't think they deserve a 57 cents rise from the outset from yesterday close based on the result. The profit was larger than expected though and a divy of 20 cents is very sweet instead. The first, maybe ever round figure dividend. Also, the NPAT was after one-off merger cost and termination expenses.

The sad thing is that A Sundich, the interim CEO is also not required by RCD after the merger. So, overall, they lost Ex MacBank executive Tony Berg, a respected CEO M Phillips and a very good CFO A Sundich. This don't look like a good deal at all now.

[SEC]

Good result today, especially since it included one-off expenses as Soulman mentioned. RCD has proven to be a nice balance in my resource-heavy portfolio.

Broker upgrades will be pending tomorrow and a further rise in RCD's price over the next few days is likely.

SEC

[mark100]

Yes SEC, broker upgrades should follow. Before today some of the current FY06 and FY07 earnings estimates for rcd were:

Huntleys: $78.8m, $96.5m
UBS: $78.5m, $84.8m
Tolhurst Noll: $70.8m, $91.4m
ABN Amro: $66.5m, $75.3m

At this rate FY06 may/will beat consensus FY07 estimates!


Edit: This morning UBS have increased their FY06 and FY07 estimates to $95m and $108m. Price target increased to $9.70.

[SEC]

Mark, are you getting your broker estimates from a website? If so, could you please provide a link.

Thanks

[mark100]

Sorry, no link SEC. I'm a client of Bell Potter and they get UBS research due to UBS's 25% shareholding in Bell Potter.
The reports from the other brokers come to me second hand.

Apparently Huntleys also upgraded their forecast FY06 profit today to $95m.

Cheers
Mark

Edit: Tolhurst have increased FY06 and FY07 estimates to $94.3m and $118.7m. Price target increased to $9.83

[k1w1]

On 7 Feb RRT volume and price started to rise. As I exercised my options at .85c I have had to be patient for some time. But having hovered at .88c till about mid January it then started its climb which this week ended at 1.04 ( A 22 % return at an average purchase of 85c).

There are two things I believe that are behind this. Firstly a 12c return of capital ( tax free) has been announced. In itself this is a good annual return. However I am hoping that this trust which is leveraged to get greater returns is well positioned to make valuation gains on its properties as well as pick up some of the Allco Finance buzz from the merger( Allco subsidiary has the management contract for RRT).

I am hoping that the rise is the smart money getting in before the results are made public.

Like MFS and RCD I suspect that not many other ST'ers are holders.

[mark100]

Another write up for Rcd in today's AFR. Some analysts are urging caution with the current high share price as the details are of the merger are not yet known and there may be downside risk when the annoucement is made.
However, Macquarie is very bullish. They have a $10 price target if the merger doesn't proceed. If it does, they reckon it should trade on 20x FY07 earnings, giving a price target closer to $12.

Mark

[mark100]

Has been creeping up slowly, just shy of $10 now. Still no news on the Allco merger, it must be close.

[SEC]

Not bad going for RCD given it's gone ex-div 20c.

[soulman]

This is a great stock. Too bad many have sold out, including myself, selling half my stake for a giveaway price. The divy was nice but when the demerger doc comes out, dividend policy might change.

RCD has ralied from a low $8 to nearly $10 in less than 2 months and of course, it has since gone ex-dividend of 20 cents as well.

[mark100]

Merger annoucement out.

Rcd will issue 86.4m shares to acquire Allco. Based on the current sp of $10, this values Allco at $864m.

Allco's proforma 2006 earnings are $60m which reflects a reasonable pe of 14.4 (based on rcd's current sp). Rcd's proform stand alone earnings are $95m. However when the businesses are merged consolidation eliminations reduce the merged earnings by $14.5m to $140.5. So in effect rcd is actually paying a multiple of 19 for Allco.

Proform EPS for Rcd stand alone for 2006 would be 48.7c on my estimate. EPS for the merged entity will be 50c, a 2.7% improvement.

So in my view, Allco hasn't come cheap but at least its EPS accreditive from day 1 and we should see benefits longer term. Also rcd shareholders will get a special div payment of any earnings that have accrued from 1 Jan to the official merger date. No mention of the dividend policy going forward.

Assuming 25% EPS growth in 2007 (which I think is very achievable), at $10.20 rcd is trading on a 2007 pe of 16.3. A while back I read an article where Macquarie reckoned the merged entity should trade on 20x 2007 earnings. I hope they stick with that recommendation.

Mark

[soulman]

Yes, a great result for RCD shareholder I think. Since this is a scrip based offer and RCD has rallied up before the merger announcement today, they are using a SP of $8.75.

I think since RCD intend to distribute a special div before the merger, I suspect that the div policy will change and also the coy name would changed to Allco Finance Group. To bad no Record name would be left in the new entity.

[mark100]

I see huntleys have upgraded Rcd from hold to accumulate based on the merger news. They estimate NPAT for FY07 of $180m - $190m which puts them on a FY07 pe 15.4 (EPS 67c).

[SEC]

Well I must admit I'm a bit confused by the announcement (as in "what's in it for me") but the market has indicated the deal is positive for RCD holders. Thanks Mark and Soulman for your comments, they are much appreciated. Yes the div policy looks set to change, and an 07 PE of 15.4 is on par with the likes of MBL (15.5) and BNB (15.6). So current price looks about right depending on the new div payout ratio. Thus I will continue to hold.

Shame we weren't offered shares at $8.75, I was hoping for a placement.

SEC

[mark100]

Huntleys put out a bullish update on rcd last week. They are recommending RCD as a buy under $10.40 and an ‘accumulate’ up to $11. They estimate FY07 EPS of 64 – 67c which, if correct, puts Rcd on a potential FY07 pe of 15 – 15.5. Not that expensive really if the forecasts turn out to be correct.

They see a lot of potential business in the coming years as the world’s airlines upgrade their fleets to the new Boeing and Airbus models. Apparently Rcd has financed 24 aircraft to date for Qantas, BA, Emirates, Singapore Airlines and Asiana. 80% are with Qantas. Interestingly, Rod Eddington has joined the board and he is a former CEO of British Airways.


I also note yet another capital raising by Record Reality, RRT, at 15% plus discount to the price before speculation broke out about the raising. They are using the funds to but more property.

After the Rcd/Allco merger, Rcd will earn all of the management fees from rrt. It seems rrt is being run and financially engineered like a Macquarie fund. When they pay dividends it is only from the proceeds of an asset sale or from refinancing loans on existing property. So the debt continues to grow...

So it seems to me the best way to benefit from rrt is to own rcd. This latest capital raising will raise assets under management and therefore fees to rcd.

[k1w1]

RRT is cutting its capital return (non taxable) from 15c to 10c per unit as a result of this capital raising which has dropped the unit price by about 10c so this is a loss of 15c per unit in total return to unitholders against some future increase in capital value and increased dividend.In addition holders must stump up more cash to exercise their 1 for 2 entitlement.

On the other hand RCD immediately receive transaction and finders fees. In additon their management fee immediately increases by a %og the value of the new buildings. So RRT unitholders are being farmed by Allco/Record management who gain short and long term while RRT holders only gain in the longer term. Second time this has happened and will probably happen again.

[SEC]

RCD is slowly climbing the market cap ladder and is now 102nd according to the AFR. Is RCD going to enter the ASX100 soon? It has plenty more momentum to do so and replace some deadbeats like PBG.

SEC

[mark100]

Plus some of the takeover action we are seeing may remove some other existing ASX100 stocks

[SEC]

Yes indeed Mark. AGL and UTB to go? Let WOR and RCD in next time and I'll be very very happy.

[mark100]

And PRK probably, if TOL doesn't get them someone else will.
You have done well on WOR, congratulations. Unfortunately I never got on board. WOR certainly have the market cap to make the asx100, and liquidity has improved.

cheers

[soulman]

So SEC, you are forecasting an ALN triumphant over AGL. It does seems that way with the 2 SP (ALN heading north and AGL south).

I see WOR as overbought and I still remember this stock at about $4.50 when they took over Parsons about 2 years ago.

This merger mania seems to work in favour of UTB and SFE. I almost bought UTB a couple of weeks ago because of Sky City CEO saying that UTB and SkyCity is a perfect fit. That was when UTB was trading at about $13.65. Also UTB was always a prey, not predator.

From what I can see, Monadelphous and WorleyParsons are 2 great performing stock over the last 2 years. Lets not forget that all engineering coy has a great run (Leighton, United Group, DownerEDI among others) and it seems they have 1 to 2 years left in them. Although none are cheap ATM.

[mark100]

Rcd is has got moving again in the past 2 days (did it ever really stop?)

Other than the fact that the general market is red hot I am expecting their Quarterly report soon so maybe that is driving it.

[soulman]

Also for the dividend Mark. The released of the merger document is crucial. The fact that RCD is distributing another dividend before the merger surely meant that the payout ratio will drop for Allco Finance to maybe 50% of NPAT.

[mark100]

Hi soulman,

Huntleys did an update on RCD this week. They reckon the payout ratio of the merged group could be as high as 70-75%. That would be nice.

They also reckon the merger will be effective as at 1 July 06. So rcd will operate in its current state until 30 June. They estimate a final div of 20c which will be Rcd's cash earnings for the period (equity accounted earnings will be retained).

They also think RCD's investment portfolio will comfortably exceed $1b by 30 June.

cheers

[mark100]

Have been reading a report on the merged Allco/RCD that was put out by Macquaire last Thursday.

They are very bullish on the merged group. They reckon Allco are massively understating potential growth in 2007 (Allco are forecasting EPS growth of >20%).

Macquaire reckon EPS growth will be more like 35% plus and have forecast EPS of 67c for 2007 FY, with 25% growth the year after.

They have a 12 month price target of $13.45.

Reasons they listed why RCD should outperform:

1. Consensus forecasts have not been updated to relect the merged groups potential earnings ie more broker upgrades to come

2. Strong sector with BNB and MBL all indicating a solid year ahead

3. Boom in avaiation leasing to come as airlines upgrade to the new generation fleets. For example Qantas has ordered $10b of new planes and Allco has historically originated over half the leases for them.

4. Significant value already embedded in RCD in its shipping and aircraft portfolio which could be relaised in the medium term by spinning these assets out into new funds (this has been speculated for some time)

Mark

[SEC]

Thanks for the updates Mark. I regret not topping up when RCD went sub $10 last week, it's a 'must have' stock to balance my portfolio. Now #98 in terms of market cap, the Allco deal should see it in the ASX100. Although I note that being included in the ASX100 is not always positive - has had a negative short term effect on WOR as Small Cap funds have to sell their holdings - so when are the large cap funds going to buy - work that one out!

Have you managed to read the RCD Explanatory Memorandum 'phone book' yet? Its sheer size put me off reading it!

SEC

[mark100]

Hi SEC, I've read most of the 'phone book', skimmed through parts if it. I'm also going to the meeting on Friday.

I'm also kicking myself about not buying sub $10. I had actually sold out at $11 and watched it fall under $10. Then it caught me by suprise and rocketed back up and I ended up rebuying in the 10.80's. Now with the DOW in freefall I feel a bit silly for paying as much as I did!

cheers

[k1w1]

I bailed out of RRT at $1.06 but with a tax free distribution of 11c at end of September have been accumulating at 93.5c,97c and today at 99 cents. Good yield even without the capital growth potential plus the smart boys at Allco are running this leveraged blue chip commercial realty trust which has just picked up the ASX building ahead of its merger with the Sydney Futures market which should fill the remaining 20% of the building nicely.

Allco pays big to be ASX landlord
Paddy Manning, Transactions
19jul06

IN what could prove a top-of-the-market deal, the highly geared Allco Finance Group has pounced to acquire the Australian Stock Exchange building in Sydney for $238 million.

The 19,905sqm Exchange Centre at 20 Bridge St, bought from German fund Deka Immobilien Investment, is the biggest single-property acquisition by the Allco-managed Record Realty Trust, and will show a yield of 6.02 per cent.

"We have been looking for a landmark Sydney property for Record Realty for some time," said Allco director Chris West.

Mr West said while the price paid might appear high, "we look at these things in a different way. We're a leveraged player".

The ASX occupies 80 per cent of the building on a lease with 5.5 years to run.

Mr West said yesterday: "I don't think they're going to go. We're a nice landlord."

Record Realty fund manager Stewart Tillyard said the ASX had significant embedded infrastructure at the property and its requirements would only increase once it merged with the Sydney Futures Exchange. "ASX aren't going to move into (the SFE's headquarters at) Harrington Street, which is an old heritage building. There's a big play there with ASX."

Mr Tillyard said Record's valuers, Colliers International, had "absolutely no trouble getting to our purchase price", and underbidders Stockland were also close.

Exchange Centre was bought as part of Deka's sale of its four prime Sydney commercial properties, which netted over $880 million, with ISPT snaring the adjoining 363 and 345 George Street properties for about $504 million and SAITeysMcMahon buying 35 Clarence Street for about $140 million.

Tom Southern, managing director of CB Richard Ellis, Deka's exclusive selling agents, said while the industry had been speculating about yield compression in the commercial sector, "this is probably the first time it's been crystallised".

Mr Southern said as a structured finance player Allco was attracted to the quality of covenant at Exchange Centre and the guaranteed income growth from the ASX lease which has fixed 4.5 per cent annual increases.

Rents were already at the high end because the building had been fitted out for the ASX, he said, with back-up generators, closed-circuit TVs and huge security. "It's not just a straightforward office building," he said. In terms of price, Allco "weren't there on their own".

CBRE Asia-Pacific managing director Richard Butler said Deka would consider buying more Australian property, perhaps in suburban markets.

"They will redeploy for a lesser-quality, better-return asset, but that's not going to be easy," he said.

Last week Record paid $565 million for a portfolio of seven German properties leased to Deutsche Telekom, in another deal brokered by CBRE.

[mark100]

AFG (the the merged Allco and RCD) report on Monday.

The share price has been soft in the last couple of weeks so it will be interesting to see if they come up to expectations.

[soulman]

Mark, I think you meant the SP has been soft the last few days. I sold out at $12.28 a couple of weeks ago and am looking to buy back in. I think many people know that the stock has already gone ex div in late June so the dividend hang on AFG/RCD is now gone.

Since BNB upgraded it's result today, AFG will probably still stick to it's 20% growth for this coming financial year.

[mark100]

Soulman, Its been falling since 14 Aug so thats almost 2 weeks its been 'soft'.

Good selling at $12.28. I sold at $12.15 but bought them back a couple of days ago at $11.55. There was a bit of buying interest in them this afternoon I see.

cheers

[SEC]

Mark and Soulman I'm surprised you guys continue to 'trade' RCD/AFG given you expose yourself to the full CGT payment on profits and are more than likely to miss significant upside than downside.

I've held since May 05 and averaged up a few months later when they announced a profit upgrade. The first purchase has realised approx 160% return incl dividends. Is a 160% return in 15 months not good enough for you guys to simply buy and hold???

SEC

PS I also hold BNB and bought more today when they plummeted after announcing a profit upgrade. Go figure.

[mark100]

Hi SEC,

I trade through a company which means I don't benefit from the 50% capital gains discount. So I don't worry about the tax effect as much.

You're right about missing potential upside. I'm always mindful of this and for that reason my times 'out' of AFG are quite short. Often I only trade half my holding. However AFG's volatility does create some nice trading opportunities which I can't resist exploiting!

On the topic of BNB, I thought their result today was excellent and they appear good value based on forward profit forecasts. I don't hold but that's only because I have a large AFG holding.

cheers

[SEC]

I didn't think AFG was that volatile (in relation to its long term uptrend) to warrant trading. Each to their own I guess.

SEC

[soulman]

Good jump for AFG today. The interest yesterday afternoon has gone to today.

Mark, I sold my other half at $8.77 without the 2 dividend payment (40 to 43 cents) so in reality, as SEC points out, holding would be a more sensible idea.

[mark100]

Poor result from AFG I thought. I sold half my holding in the first few minutes of trade.

The numbers look impressive but have been boosted by the proceeds from selling 2 ships. In the annoucement they say one ship was sold which realised a profit over over $30m although someone at Allco has today told me that 2 ships were actually sold. So someone is wrong.

In any case, it appears to me that of the $143m proforma NPAT for the merged entity, around $21m is from the profit on the sale of ships. I expect asset sales to become more regular as Allco recycles some of the investments on its balance sheet however the market will probably regard these earnings as lower quality.

Edit - The main positive was the old RCD's level of investments, up to $1202m. Investments averaged around $978m for FY06 and are starting FY07 23% up on this level. This tells me that the old RCD probably would have probably posted EPS growth well in excess of 20% in FY07 even if it hadn't of merged with Allco.

[SEC]

quote:Originally posted by mark100

Poor result from AFG I thought.


You're a hard man Mark.

At the moment the market is prepared to trash any stock that even beats expectations, let alone meet them. Just look at BNB.

Allco was never going to exceed its EM forecasts by much, given the EM was prepared only two months before the end of FY06.

RCD was lauded for selling assets at the right price. Nothing wrong with selling at a big profit, that's how RCD has been able to accumulate assets worth $1.2B. Now you're reckoning selling assets is a bad thing (ie lower quality profits?)

Allco has stuck to its 'AT LEAST 20% increase in eps' for FY07. I suspect that's why the market sold today. Note a range wasn't given, so there could be good upside on 20% within the next six months. And RCD typically surprises to the upside.

Mark, I wonder if Allco has sold another ship since the reporting period?

SEC

[mark100]

Hi SEC,

After I wrote that I was thinking it was a bit harsh. Nothing wrong with the result of the old RCD, on my numbers I thought $96.5m was the best they could possibly do and they slightly beat that.

The 'poor result' comment was more directed at the proforma numbers for the merged group. I wasn't happy that they relied on the ship sales to meet their proforma forecast. I would have liked any profits from asset sales to allow them to suprise on the upside (given RCD shareholders effectively paid for Allco based on Allco's forecast profit).

I asked someone at Allco about the ship sale and this is the response I got:

"Two vessels were sold during the year, the previous $8.1m to Record represented half the profit from one of the sales. Extrapolating this to two vessels, I can see where the $30m may have been generated."

So it seems 2 vessels were sold during the period but the annoucement only says one was sold?

You are right about the 'at least 20%' forecast sinking them today. The market was looking for an upgrade to that and as soon as I read it I knew they would get sold off. As you say, they will probably suprise on the upside later on. I'm almost certain of it. $1202m of investments is a great starting point.

When I went to the RCD/Allco merger meeting I was able to have a brief chat with Coe. I got the impression that they were very relaxed about the 'at least 20%' forecast.

Mark

[mark100]

Allco flags 20 per cent earnings growth
Email Print Normal font Large font August 28, 2006 - 5:10PM

Allco Finance Group, has forecast 20 per cent earnings growth in 2007 and says there are still plenty of affordable, quality assets up for grabs despite increased bidding competition in investment banking.

Australia's newest investment bank, which was formed through a merger with Record Investments in July, revealed on Monday that Record's annual net profit for 2006 lifted 56.8 per cent to an above forecast $96.9 million.

Record's earnings per share were 49.6 cents, up 33 per cent on the previous year.

Pro-forma results for the merged entity showed a slightly-above-forecast net profit after tax of $142.7 million, excluding adjustments for new accounting standards.

Record's growth was boosted by a doubling of total investments, which included a doubling of its aircraft fleet to 34, a $35 million investment in a rail portfolio and an $83 million addition to securitisation investments.

The new merged group is targeting earnings per share growth for 2007 of 20 per cent, a figure Allco chief executive David Coe admitted was below the more ambitious growth targets of rivals.

Bab****& Brown, for instance, last week lifted its earnings guidance for calender 2006 to 45 per cent EPS growth.

"If you look at the history of Allco and Record, we like to be nice and conservative ... the more volatile the market, the more you should be cautious in what you do, and if we surprise, we like to surprise on the upside and not on the downside," Mr Coe said.

He said the deal flow for the business continued to be "very solid", and added that reasonably priced assets were still available on the international scene.

" ... the competition pricing isn't as intense as people think out there," Mr Coe said.

Allco's traditional focus on transport will continue, Mr Coe said.

But he added that the group was also searching the globe for infrastructure assets, and had already invested $7 million into US wind power, with a further $47 million to $50 million committed.

"With your Mac Banks, Babcocks and Allco, not a single one of us can cover the whole market, so you'll always find good opportunities," he said.

The group's airline business, which provided the biggest boost to group earnings in 2006, will continue to invest in Europe and Asia, particularly in China, where industry growth is expected to skyrocket.

Allco is also expecting its biggest client, Qantas, to order more aircraft, with its order book worth around $9 billion, Mr Coe said.

He said shipping will experience a "kick back" in 2007.

"So we might buy a couple of ships this year," Mr Coe said.

Allco will pay a final fully franked dividend of 21 cents per share, taking the total dividends for the year to 41 cents per share, up 34 per cent on the previous year.

[soulman]

I think because it was already ex-div, Allco was not cum div and hence, the SP sinks. Might be a good opportunity to get some back.

Also, maybe the dividend announcement was at the lower end of the 20 to 23 cents.

[mark100]

I was able to get my hands on a few updated broker reports for AFG today.

UBS forecast FY07 and FY08 EPS of 66c and 77c. $12.80 price target

Aegis forecast FY07 and FY08 EPS of 61.3c and 73.3c. $13.40 price target

Tolhurst Noall forecast FY07 and FY08 EPS of 66.8c and 86.8c. $12.90 price target.

I understand Macquarie Equities have also confirmed their $13.45 valuation.

Looking through a few quotes from the papers, a few points to note:

Allco sold a ship for $30m (doesn't say $30m profit, this ship issue is confusing)

Coe sees great potential in avaiation pointing to Qantas's $9b order book and dramatic growth in Chinese aviation

Expects to launch some kind of transportation fund, focused on either ships or aircraft

Coe likes to be 'nice and conservative' in earnings forecasts

[mark100]

Has been included in the S&P/ASX100. Not helping the price however, it looks like someone has been selling a large parcel in the 11.30-11.40 range and now some stop losses have been hit, pushing it under 11.20. Nice buying under 11.20 I thought.

[mark100]

Looks like I bought way too early. Down 5% to 10.80 so far on the news of inclusion in the ASX100.

I see a director has picked up $181k of shares at $11.32

[SEC]

As I found out with WOR's inclusion in the ASX100 three months ago, the unfortunate side-effect of being included in the ASX100 is that it is dropped from the ASX Small Cap Index. So managers of boutique funds that track the Small Caps have to remove AFG from the index. The effect of being removed from the Small Caps is greater than the benefit of being in the ASX100 so the fund managers sell the balance. The effect is annoying but temporary.

SEC

[soulman]

I personally think that Mac Bank is a better investment at the moment although MBL has risen everyday for the past few days.

The yield in AFG is not attractive anymore, although better than the lackluster BNB. The track record of Allco before the merger is unknown in the public eye and that may cause uncertainty over the upcoming result from the merged group.

[soulman]

SEC, how do you see this 10%+ slide in WOR after reporting profit up more than 100%. This is in contrast to UGL, LEI and MND, all going up after their result.

[mark100]

Hi soulman,

I did look at MBL when it was sub $60 although I would have had to reduce my AFG weighting to buy into MBL which I decided against. My main concern with MBL is they have to some degree become a victim of their own success. They now need to make bigger and bigger bets in order to keep profits growing. I see AFG as been at a much earlier stage in its growth cycle. The AFG yeild is still better than MBL's as well.

I found this on hotcopper:

Macquarie: AFG on the runway and ready for takeoff!
29/08/2006
Trading Pick of the Day

AFG: On the Runway and Ready for Takeoff!

Shares in Allco Finance Group (AFG), formerly Record Investments, fell over 4% yesterday despite a “stellar” result. Macquarie Research Equities (MRE) believes AFG remains one of their “highest conviction recommendations” and accordingly reiterate their outperform recommendation. Macquarie Warrants offers a number of instalments over AFG for traders and investors looking for leveraged exposure to the AFG share price, including AFGIMN Dec06 $3.75 Instalment and AFGJMC Jun08 $6.81 Income Instalment.

The statutory FY06 result represents 12 months from Record Investments and none from Allco, but Allco also provided a proforma merged entity FY06 result.

A stellar FY06 from Record. Record Investments has delivered FY06 NPAT of $96.9m, up 57% and about 1% better than MRE’s forecast. Earnings Per Share (EPS) growth of 55.7% was delivered which amounts to average annualised growth of 62.7% since Record was listed in May 2002. The result was driven by strong invested funds growth of 50% and a stable yield. A fully franked final dividend of 21¢ps was declared taking the full year to 41¢ps, up 34%.

Pro forma Allco-Record FY06 was solid. The pro forma profit for the merged entity of $128m contained a $14.4m loss largely in relation to the short-term poor performance of an Allco-sponsored Singapore real estate investment trust (REIT) which listed in March 2006. Allco was required to mark this investment to market on 30 June, resulting in a $10.6m loss. The security price has since rallied and Allco has clawed back $6m of this loss to date. Excluding this item, Allco is around 1–2% ahead of its May explanatory memorandum forecast, with the composition including more principal investment and less origination profit.

Riding the updraft in aviation leasing. Allco spent a further $156m in FY06 to acquire 17 additional aircraft with 34 in the portfolio. The outlook for the Allco aircraft leasing product is strong and MRE expect further market penetration of new carriers, particularly in Asia and Europe. Allco has barely scratched the surface in terms of deal flow in what could be a booming market over the next three years based on the arrival of two new fuel efficient jets from Boeing and Airbus.

Price target of $13.45 unchanged. MRE have derived a $13.45 price target by applying a price to earnings multiple of 16x FY08E EPS. This represents a 6% premium to the Macquarie Research industrial peer multiple of 15.1x.

The investment banking climate remains healthy and the outlook for aviation leasing is moving into a boom scenario. MRE still believe AFG’s EPS guidance of +20% remains too conservative given the track record of growth, the strong outlook on deal flow and significant embedded profit on existing investments - outperform retained.

[soulman]

Believe it or not, I picked up AFG at $10.40 yesterday. The lows. Nevertheless, it will probably go down next week, who knows.

I am comfortable with the price as I sold the same amount at $12.28 about a month ago. So it was a brillant decision to sell. Not buying MBL yet, only if they hit $60 again.

There seems to be upside momentum in AFG profit forecast.

[stevieb]

That's a damn good price to pick them up at, 30c less than I did. I agree with the MRE belief that "The investment banking climate remains healthy" and hence any of AFG/BNB/MBL are attractive at the right price and I think $10.40 equates to that for AFG.

[SEC]

The recent sell-off is index driven and the fund managers selling them are sheep (wish I knew who they were so I can make a point of never using them to invest my hard earned money). I can see AFG drifting toward $10 at which point I'll be adding more.

SEC

[stevieb]

Huntleys have updated recommendation to Buy (was Accumulate) based on price moves. Can only agree but yes I think low may be in low $10's (don't think it will go below IMO).

[SEC]

quote:Originally posted by SEC

I can see AFG drifting toward $10 at which point I'll be adding more.


Didn't drift but rather plummeted to $10. I topped up this afternoon. The market is always correct but can have bouts of extreme stupidity at times. This is one of them. A great opportunity to buy AFG off the moron fund managers.

SEC

[soulman]

My buy at $10.40 looks premature at the minute. Not sure if I should trade these below $10. I actually hunch that $10 mark, but just in case it didn't get there, I bought a few days earlier.

RIN looks sick as well but of course, the sickest holding of mine is indeed BHP.

[mark100]

From some Macquarie research notes:

"This has obvious implications for our portfolio, but there is another stock that has fallen 20% in the last two months we would buy again. This is AFG.

In short, the reasons to buy are these:
1. Moving from AASB to IFRS underwrites the securitisation market for the foreseeable future. These guys have that game kicked to pieces;

2. Their lease book has moved from aircraft & heavy equipment leasing to more properties with government tenants with a 10yr lease (despite recent growth in aircraft leasing);

3. FY06 results were slightly above high expectations & were the basis of EPS upgrades.

The stock has underperformed recently for these reasons :
1. UBS downgrade; and
2. moving into ASX100, meaning several small cap managers have had to sell & large cap managers haven't had to buy yet.

3. short term volatility in earnings. in my view this was due mostly to merger costs (one-off) that have been expensed."

I note that the UBS 'downgrade' was when the stock was in the high $11's. They moved from buy to neutral because of the high share price. Their price target was actually increased to $12.80. So given the recent falls I expect UBS to soon reinstate the buy.

I also see in some notes from Tolhurst Noall today that they are blaming the ASX100 inclusion for the falls and call it a buying opportunity.

[mark100]

Not the kind of article investors want to see. The article on its own is not that big a deal but according to the AGM paperwork the auditors have also resigned. Are the 2 connected? I did hear the auditors were possibly getting booted because their fees were too high. Maybe it was for other reasons.

I have substantially cut my AFG holding until we get some clarity on the issue

Sprung: Allco Finance fiddles the numbers and makes them fit
Lisa Murray
September 27, 2006


DAVID Coe's Allco Finance Group has been caught out juggling numbers in its financial accounts without informing shareholders, in a move that could raise alarm bells with investors and regulators.

Allco's financial report released in late August said the company had lost $13.7 million from associates and joint ventures while its receivables (money owed to the company) increased by $50.6 million. All up net cashflow from operating activities was $57.8 million.

However, according to the company's annual report released four weeks later, those numbers had changed, without an alert to shareholders.

Allco's share of profit from associates and joint ventures turned into a positive $13.7 million and the increase in receivables was reported as a smaller $23.1 million. As a result of the two changes, the net cashflow number remained the same.

Some investors picked up that the share of profit from associates was incorrectly accounted for in the initial report and contacted the company. But instead of correcting the mistake and changing the net cashflow number, Allco changed the value of the receivables and ended up with the same result.

A spokeswoman for the company acknowledged that it had made an error in the financial report lodged with the Australian Stock Exchange in August. But she said the annual report was the "correct version".

"The profit numbers and the cashflow numbers haven't changed. It's more in the detail and we're comfortable that the results that we've put out in the annual report are correct," she said.

"It was incorrect when they lodged the draft with the ASX initially. But the annual report has been through the audit process and that is the correct version."

She said the company did not alert shareholders to the change because the bottom-line cashflow number did not change.

But one investor described the change as "bizarre" and "very strange behaviour from a $3 billion company."

The change in the numbers may prompt shareholders to challenge the financial accounts at the company's annual meeting on October 25.

There are already concerns about the transparency of Allco's accounts, which have hurt its shareprice in recent months.

[SEC]

quote:Originally posted by mark100

Not the kind of article investors want to see. The article on its own is not that big a deal but according to the AGM paperwork the auditors have also resigned. Are the 2 connected? I did hear the auditors were possibly getting booted because their fees were too high. Maybe it was for other reasons.


So was today's explanation by Allco enough for you?

The controversy all started with a note by Macquarie Equities. The irony is that Macquarie has made 'fiddling the numbers' into an art form.

Did PWC walk or were they pushed? If their auditors were competent they would have picked up the 'inadvertantly omitted bracket' and the subsequent effect on the numbers before the FY report was released.

SEC

[mark100]

Yes the explanation was good. The article on its own would have never worried me but I didn't know if there was a connection with the change of auditors.

I spoke with someone at Allco today and they assured me the change of auditor was simply inline with their policy of changing auditors every few years as they regard this as good business practice.

[major]

Hi Mark 100,
at least AFG moved quickly to quash the article and prevent further articles. Good move I think, rather than waiting in hope that it would all go away.
I have been buying and am happy to hold AFG at prices I never thouht I'd see again.
I suspect the AGM could see their forecast increased slightly.

[soulman]

Looks like AFG is having yesterday's rally. While everybody went up yesterday on the 100 points gain, AFG was flat yesterday. So today it's their turn.

[mark100]

UBS upgraded them this morning to buy due to the recent falls. I've found UBS recommendation changes often have a noticeable effect on a stock, even large caps.

Wilsons also put out a report this morning. It was the first negative report I have ever read on RCD/AFG. They have a 12 month target of $9.75 and basically compared AFG in a bad light to BNB. Although I note they have never had a buy on RCD/AFG so whats the point of a hold recommendation if none of your clients own it! I've also found Wilson's research has zero effect on the market, even for small caps.

[SEC]

quote:Originally posted by mark100

UBS upgraded them this morning to buy due to the recent falls. I've found UBS recommendation changes often have a noticeable effect on a stock, even large caps.


I've noticed the same effect too Mark. They're probably the most influential broker covering ASX stocks, so it bodes well for AFG to rebound back to $11+ where it belongs. But I find UBS no better than anyone else in making correct calls medium-long term.

SEC

[soulman]

It seems to be on its way back to $11.00 plus. With MBL and BNB forecasting strong results, AFG will most likely suprised on the upside by a huge margin as well.

[mark100]

Huntleys seem quite confident that there will be an upgrade, possibly at the AGM next month

[soulman]

Oh well. I sold just about half my holding last Friday. Should have do it today or tomorrow as it turned out. Anyway, what can you do. It was a fast trade.

[SEC]

quote:Originally posted by soulman

Oh well. I sold just about half my holding last Friday. Should have do it today or tomorrow as it turned out. Anyway, what can you do. It was a fast trade.


You just can't help yourself can you Soulman:D.

[SEC]

I was disappointed there was no profit upgrade at today's AGM and thought that would lead to a slide in price. But the market seemed to like other aspects of Allco's business update (like the aim to have $2B in new funds under management) and sent the price up 1.5%. Allco should do well in getting new funds, they have a good track Record:D.

Did you go to the AGM Mark?

SEC

[mark100]

Hi SEC,

No I didn't go. If they had of put the meeting closer to a weekend I might have made the trip.

I also expected to see a price slide when they didn't upgrade the guidance but I liked the bit about $2b in new FUM.

The other areas of their business also seem to be in good shape.

cheers

[soulman]

I thought they were (sorry, I was) in trouble when there were no upgrade but the wording "at least 20%" was strongly used in all the outlook statement, so at least that was comforting. I just can't fathom how MacBank can rise from $65 to $74 in about 4 weeks since the profit update of at least 20% rise in underlying profits. Who here catched that ride? I missed out. I mean literally, the 3 big banks, St George, CSR, Rinker and Orica have all had a good run until they report in the next few weeks. Anticipation is high so I guess once they report, their SP will drop.

[mark100]

I liked the bit in today's AFR where Coe said they were 'focused on underpromising and overdelivering'.

Also it said there are plans to launch a $200m Transport Fund before June. The market has been waiting for this for some time. This would take those assets of the balance sheet and AFG would probably unlock some profit at the same time.

[major]

I might be slightly at odds but I am quite happy to hear them keep repeating the "at least 20%" line.

How much more confirmation of a good result can we expect? The other information released suggested that the confidence in them reaching 20% growth is not unwarranted and that better growth is a distinct possibility.

Mark100, I like the David Coe quote. I think the market is already counting on them doing just that?

[mark100]

Macquarie: AFG: AGM Highlights Strong Start to FY07
26/10/2006

Trading Pick of the Day

Allco Finance (AFG) held its annual general meeting yesterday and provided an update on the year-to-date trading. The results were strong, and Macquarie Research Equities (MRE) believe that Allco’s FY07E EPS growth guidance (>20%) remains too conservative given the track record of growth, the strong outlook on deal flow and significant embedded profit on existing investments. MRE have an outperform recommendation on AFG and believe that upside exists to their $13.45 price target.

Strong first quarter. One of the best leading indicators for investment banks is staffing numbers with Allco employees increasing from 253 at 30 June to 313 by late October, a 23% increase in four months. Around half of Allco's staff are located in six offshore offices and MRE expect these offices to move towards being material profit contributors over FY07.

Healthy deal flow. Origination fees could surprise, with four new aircraft delivered in 1Q07 taking the fleet to 38 planes and another four LPG tankers to arrive by 4Q07. Funds under management is also flying, with a target of $2bn of new inflows by June 2007 taking Allco closer to $7bn, 40% growth.

Earnings guidance unchanged but risk on the upside. The Allco FY07 profit guidance is "at least 20% EPS growth" and compares to our forecast of 36%. The body language from the Allco board was positive and the profit guidance is now more conservative following this AGM, with close to four months completed and better visibility on the remainder of the year.

US$610m Record Realty transaction. The Allco advised that Record Realty (RRT) is currently executing a US$610m office building acquisition in the US. Allco should receive a significant advisory fee on this transaction, which is most likely to fall in 1H07, and increased management fees from RRT.

MRE have a price target of $13.45. If MRE adjust Macquarie and Bab****and Brown consensus estimates for a June 2007 year end, these peer investment banks are trading on FY07 price to earnings ratios of 15.3x and 17.9x respectively.

MRE’s 12-month price target of $13.45 is derived by applying a price to earnings multiple of 16x FY08E EPS. This also represents a small premium to the Macquarie industrials peer average of 15.7x. MRE state that potential earnings upgrades are possible given healthy investment banking environment, further investments in aircraft, acceleration of profit growth realised by sale and/or maturity of investments on balance sheet.

The investment banking climate remains healthy and the outlook for aviation leasing is moving into a boom scenario. Allco’s FY07E EPS growth guidance (>20%) remains too conservative given the track record of growth, the strong outlook on deal flow and significant embedded profit on existing investments. Allco remains one of MRE highest conviction recommendations.

[stevieb]

quote:Originally posted by soulman

I just can't fathom how MacBank can rise from $65 to $74 in about 4 weeks since the profit update of at least 20% rise in underlying profits. Who here catched that ride?

I caught that ride!
But don't worry, I think AFG (and BNB which I also own) are in for a good year, stock market is doing well which should be beneficial. My personal opinion is they werebeing cautious, based not unreasonably on some considerable jitteriness on stock markets but current indications are this will be a good to very good year for them.

[soulman]

Well, I thought of trading AFG when the share price hold up yesterday and today it just went on a buying mode. A good day on the market is influential as well.

Just on those shares going up in anticipation of their result, the theory of their SP going down after the report is obviously not true. ANZ flying after they report today. Good to see someone enjoy the MacBank ride and $80 might be on the cards here since they don't report until 16th Nov. It seems AFG is very undervalued compared to BNB ATM.

[mark100]

AFG has no friends at the moment. Down around 6% in 2 days.

Anyone know of any stock specific issues that could be affecting AFG? I can't find any at present. It seems BNB is flavour of the month

[SEC]

quote:Originally posted by mark100

AFG has no friends at the moment. Down around 6% in 2 days.

Anyone know of any stock specific issues that could be affecting AFG? I can't find any at present. It seems BNB is flavour of the month


I can't find any issues either and it was only a month ago when AFG reaffirmed its 20+% eps for FY07. I suspect recent weakness is due to an impatient insto selling down. At least I also own BNB and its surging price is mitigating the recent AFG losses.

AFG has been a disappointment since the Allco takeover took effect. I know there has been an unwinding of the 'euphoria premium' since July but I think it's been overdone now. At 12-month forward PE's AFG is the cheapest of the three ASX listed investment banks AFG MBL & BNB. Seems to be good support for AFG around the $10 mark - unfortunately that's where I suspect it's heading (again).

SEC

[mark100]

AFG gets a mention at the bottom

Sunday, November 12, 2006
China's Bank said Dubai May Bid for Singapore Aircraft Leasing

Bank of China Ltd. and Dubai Aerospace Enterprise are among at least three companies that may bid about $1 billion for Singapore Aircraft Leasing Enterprise, Asia's biggest plane leasing operation, five people with direct knowledge of the sale said.

Final offers are due today, said the people, declining to be identified before details are made public. Singapore Airlines Ltd., the world's No. 2 carrier by market value and 35.5 percent owner of Singapore Aircraft, said last month there was a shortlist of buyers for the business. A bid by Bank of China would be its first overseas acquisition of a non-finance company.

Singapore Aircraft leases planes to 34 airlines including Canada's WestJet, China's Shandong Airlines and Kenya Airways, posting profits every year since it started in 1993. Earnings are rising even as airlines in the Asia-Pacific region, the fastest growing area for air traffic in the world, struggle with high oil prices.

``Leasing appears to be the only part of the aircraft sector that generates decent returns,'' said Sondal Bensan, who helps manage $30 billion at BT Financial Group in Sydney. ``If you increase the useful life of aircraft, even by two years, there are attractive returns to be made.''

Singapore Airlines, Asia's most profitable airline, last month reported a 15 percent drop in net income in the three months ended Sept. 30 because of rising fuel costs. The decline was the sixth in seven quarters.

Bank of China

Bank of China, the nation's second largest, plans to expand into aircraft leasing, the people said. Royal Bank of Scotland Plc., which holds a 4.4 percent stake in the Beijing-based bank, has an agreement to help further develop aircraft finance. The bank has been providing guarantees on almost all aircraft leased by Chinese carriers since the 1980's, according to its Web site.

Bank of China is facing increased competition from rivals including Industrial & Commercial Bank of China Corp. ICBC has extended in excess of 70 billion yuan in loans to the aviation industry, covering at least 100 aircraft loans and 200 guarantees, according to the bank's Web site.

Morgan Stanley and UBS AG are advising Bank of China on the bid.

Dubai Aerospace was set up in February this year, and plans to expand its DAE Capital aircraft leasing business, according to the company's Web site. Dubai Aerospace is being advised by Perella Weinberg, the people said.

Japanese trading house Mitsubishi Corp. is also among the bidders, three of the people said.

Spokesmen at the bidding companies and their advisers either declined to comment or weren't immediately available.

Asian Growth

Asian airlines will spend about $1 trillion in the next two decades buying planes, according to Boeing Co. Singapore Aircraft, which said net income surged almost sevenfold to $34.7 million in the year ended March 31, is planning to quadruple the number of aircraft it owns and manages to 300 in five years, Chief Executive Officer Robert Martin said in an interview in September.

A new A320 from Toulouse, France-based Airbus SAS, which cost $250,000 to rent per month in 2003, now costs $400,000, Martin said.

Singapore Airlines and German Bank WestLB AG each own 35.5 percent of Singapore Aircraft. Temasek Holdings Pte, Singapore's state-owned investment agency, has a 14.5 percent stake in the company. GIC Special Investments, the private-equity unit of the Government of Singapore Investment Corp., also holds a 14.5 percent stake.

Sean Lee, a Singapore-based spokesman for Singapore Aircraft Leasing, said a transaction may take place before the end of March. He declined to comment further.

Debt, Equity

Singapore Aircraft has about $2.5 billion of debt and an equity value of about $500 million, said three bankers who were asked to arrange funding for one of the bidders.

The shareholders of Singapore Aircraft hired Citigroup Inc. in June to explore options includ

[mark100]

Looks like AFG will lose QAN as a customer. MBL will be getting the deals now. I suspected this a few weeks ago and should have acted on it

[SEC]

quote:Originally posted by mark100

Looks like AFG will lose QAN as a customer. MBL will be getting the deals now. I suspected this a few weeks ago and should have acted on it


I think the market is clutching at straws here and it certainly doesn't warrant a 15% fall in share price. There's likely to be no significant impact on earnings now or in the future.

1. The aircraft leases are long term (typically 10 years) and any agreements AFG has entered into with Qantas will most likely have to be honoured to the end of the lease even though there is a change of ownership.
2. AFG has several other clients for aircraft leasing deals including Singapore Airlines, British Airways and Emirates so losing Qantas does not spell the end of AFG's aircraft leasing division.
3. AFG can re-lease the QAN aircraft to existing clients, new clients or sell the aircraft - business as usual.
4. The MBL/Texas Pacific bid for QAN is definitely not a done deal. MBL has a significant conflict of interest re its ownership of Sydney Airport, and the ACCC is likely to be involved. QAN may reject a bid anyway, should one ever eventuate.

SEC

[SEC]

From the Age:

The bid has some hurdles to jump before it can come to fruition. Foreign buyers are restricted from owning more than 49 per cent of the national carrier, individual foreign buyers are restricted to a 25 per cent holding and foreign airlines are restricted to 30 per cent.

Airports legislation also restricts airlines to 5 per cent ownership of an airport. Macquarie Bank owns 17 per cent of Macquarie Airports which, with related Macquarie funds, in turn owns 64 per cent of Sydney Airport.

Under the legislation, the Macquarie cross shareholding in MAP is unacceptable if it reaches 15 per cent.

So for this takover to be acceptable something has to give - MBL's stake in either QAN or MAP or MAP's stake in Sydney Airport.

In any case some analysts have speculated that MBL may extract value from the QAN deal by leasing more of of the Qantas fleet. Nothing mentioned about poaching business away from Allco - not before the leases expire anyway.

SEC

[mark100]

Hi SEC,

Yesterday I spoke with someone from Allco plus read some Allco updates from Macquaire Equities, Tolhurst Noll and Huntleys.

All of them reckon it doesn't affect their view on the stock.

A few points from the Allco person:

22 of the existing 38 planes are leased to QAN although these deals can't be refinanced to another lender so they are safe (the fees on breaking the lease are prohibitive)

None of the growth in aircraft leases this FY have been QAN deals, they have all been asian based airlines which is where they see the growth coming from

None of the forecast remaining deals for the rest of FY07 are QAN deals so no impact on FY07 numbers

Obviously QAN is a major customer at present so it is the growth beyond FY07 that the market will be focusing on. If AFG can successfuly ramp of their Funds Management sectors and continue to originate aircraft leases for new Asian customers the long term story is still intact.

Comments from Macquaire Equities were:

"Qantas has indicated that they have received an incomplete approach from a Macquarie Bank and Texas Pacific consortium. We consider the implications for Allco's aircraft leasing business.

Impact
Around 3% to 10% of profit could be affected if Qantas relationship lost. Allco has about 60% of its profit coming from the leasing business of which about 30% to 40% comes from aircraft (20% of group profit from aircraft leasing). If 50% of this is derived from Qantas, which is unlikely to be the case in the future given the offshore expansion plans, then up to 10% of group profit may be affected. Of this 10%, only about a third or less comes from origination of new leases with a significant amount from the leasing spreads on existing leased planes and residual profits on sale of the planes. Our best estimate at this stage is about 3% to 10% of future profit may be affected should Allco lose Qantas as a client and does not find other clients to replace the potential lost business.

Qantas unlikely to break the leases. It is a very low probability that Qantas would break the leases and give back the planes to Allco. Qantas needs the planes as the Jetstar fleet (A320s - most leased from Allco) are the most in demand planes in the market and it is difficult to identify where Jetstar or Macquarie would get another 20 of these planes in a tight aircraft market. The exit costs from the Allco leases and the new additional costs of fitting out new planes would most likely be prohibitive.

Plenty of aircraft leasing business being won by Allco. Allco now has relationships with Qantas, Emirates, Singapore Airlines, British Airways, Cathay Pacific, Aseana, Ryanair and China Eastern Airlines. Any loss of business from Qantas could be made up through any of these other relationships or potential new relationships.

Action and recommendation
Outperform. Allco is heavily focussed around people and with staff numbers up 24% in the first four months, we believe the operating performance should be following a similar trend. Despite this potential negative Allco event of a Qantas takeover and the potential for a significant capital raising given current Allco debt levels are stretched, Allco remains one of best stock recommendations."


An interesting quote from todays AFR:

"One company that is being seen by a sell is AFG, which generates significant leasing business from Qantas planes. But it is also said that Allco has some involvement in the bid"

Maybe AEQ has a part in the deal?

[mark100]

From another AFR article:

"Other partners in the deal include Pacific Equity Partners-Bain and David Coe's Allco Finance, which comes to the party as one of QAN's aircraft financiers and has on its board Rod Eddington who not so long ago ran British Airways"

[soulman]

All this and a $10 buy on AFG yesterday would be a dream. I said put a bid in at $10 soulman and oh oh.....didn't do it.

Anyone here benefit from the fall?

[mark100]

I was a spectator yesterday soulman. But with almost 5m shares traded it indicates the massive support AFG has around $10.

[SEC]

quote:Originally posted by mark100

From another AFR article:

"Other partners in the deal include Pacific Equity Partners-Bain and David Coe's Allco Finance, which comes to the party as one of QAN's aircraft financiers and has on its board Rod Eddington who not so long ago ran British Airways"

$500M capital raising just announced, 2 for 19 rights issue at $8 for retail holders.

So it's pretty much confirmed Allco has an involvement in the QAN approach. If Allco has been asked to participate there'll have to be some benefits in doing so, not least keeping QAN as a customer after current leases expire and perhaps expanding leasing arrangements on more aircraft.

Unfortunately capital raisings usually sees subsequent share price weakness. So $10 here we come again[?][B)][:0][|)]

SEC

[mark100]

Hi SEC,

A capital raising is not that unexpected. The balance sheet of RCD was almost fully geared before the merger and given the growth in investments over the past few months, had RCD remained independent it would have almost certainly raised more equity.

However RCD would not have raised anywhere near $500m so this supports the view that some of the funds will be used for a tilt at QAN.

How low the price falls will depend on the price of the placement. The $8 price for entitlement issue is very attractive for current shareholders however it is only a 2 for 19 entitlement. I wouldn't expect the placement to be priced below $10 although I've been wrong before.

Thankfully they have maintained the forecast of at least 20% EPS growth, despite the increase in shares on issue.

Mark

[major]

The fact they have maintained their current forecast will help protect the shareprice to some degree. Even with more shares, maintaining their forecast EPS growth displays to shareholders the medium to longer term benefit of this raising. I'd say they could easily raise the full amount from instos alone at well above $8 but at least they have involved shareholders at a very attractive price.

Further to this raising, AFG have planned to raise by July next year, a further $2b in funds from the establishment of new asset funds. I tend to see more positives than negatives in this current raising and the plans for the balance of this FY.
08 broker estimates will be upgraded too as a result of this news I'd expect.
This is one raising I feel happy to be part of (so far anyway!) and any ST downside to the price should be reasonably shortlived I'd expect.

[mark100]

Hi major,

Agree with your comments. I also read that the placement part of the raising will be done at the VWAP over the past 10 days. Given the high volume on Wed, I would expect this to be priced in the low $10's

cheers

[soulman]

Yes, it all depends on the first up cap raising and SEC, unfortunately you are right. AFG are set to hit $10 or lower again. Whatever happens, the $8 entitlement, even though a steep 2 for 19 have already gone ex-entitlement.

So, the new cap raising will not participate in the 2 for 19 and because of that, $10 will be about right for them. So AFG are set to fall by at least $1 on Wednesday. I had a sell order yesterday and it nearly went through but didn't. Oh well.

[mark100]

soulman, I think you're being a bit negative in your estimate of where the AFG shares will open.

I've read a report from one broker who reckons the placement will be done at around to 10 day VWAP which I reckon is probably around 10.30 given the large volume last Wed. Huntleys reckon it will be around $10-10.25

On the plus side, this raising confirms AFG's strong deal flow. They have also effectively upgraded their profit forecast as they have maintained their EPS guidance despite the fact that it will take 6-18 months for all the new capital to be deployed.

[soulman]

I like to add downside plus more into my forecast. Therefore I won't get dissapointed when it actually happen. I personally think that AFG might open at $10.60 after the institutional bookbuild.

The $10 is just a ploy so that I can buy more.

[k1w1]

Finally the real Soulman emerges. I have never read a poster who so relentlessly posts about all there mistaken trades and failures as you have, Soulman. I have always viewed it as foxing.

[major]

Bullseye Kiwi!

What also stands out like dog's balls on some threads is Soulman's prose and grammar which sometimes gives the impression that Soulman is in need of shock therapy, but yet on other threads, it's worthy of an Oxford english scholarship???
Who is he fooling?

While Soulman's deception doesn't warrant the same criticism as a more dangerous Robbo type ramper, it nevertheless undermines the good standard that Sharetrader offers and maybe we should all make a bigger effort to expose and clean up the site.

[soulman]

Hi Kiwi and Major,

As a starting trader (day to day) switched from investors (3 to 6 months), I must say emotions plays a bigger part in trading.

I am trading with a 1 week view so the fluctuation in SP is what I want with low risk entry. So posting my dissapointment
I guess is a beginners trader sins. Many trader have sold and watch their shares go way higher/ and alternatively also didn't take profits and watch their shares go down to their original level. This effects your emotion unless you are a seasoned trader. Although, the quote I used from a trader: "No one ever went broke taking a profits" is still very relevant.

[mark100]

$10.40 placement price which is a good result for existing shareholders. Apparently it was very over-subscribed

[soulman]

Yes Mark. I foxed the stock today and make it go up today on heavy volume of 2 mil shares.

Good result for all shareholders.

[SEC]

quote:Originally posted by SEC

Unfortunately capital raisings usually sees subsequent share price weakness.


A stunning exception to the rule for Allco today, up 53c or 4.8% when the 25c rights are taken into account. A clear sign of approval by the market of where Allco is going. My original intention was to sell my rights but at this price it looks like I'll have to cough up - but happy to do so.

SEC

[soulman]

Major and Kiwi, should I post that I sold half AFG yesterday at a miserly $11.30 yesterday and missed out on a further 54 cents today.
Too late, it's in but as I learn to be more of an emotionless trader, I will not post these mistakes again even though I did made a profit on it. I did sold AFG a while back at $12.28 and that turned out to be good as I have traded AFG quite a few times. The entitlement later will also be a bonus.

SEC and Mark, did this rise also take you by suprised?

[mark100]

soulman, I expected initial weakness (which we didn't get) from AFG due to the capital raising followed by a share price run given the confirmation of strong deal flow.

Remember AFG has range traded for several months and has under-performed the likes of BNB and MBL over that time. It was due for a re-rating.

[SEC]

quote:Originally posted by soulman

Major and Kiwi, should I post that I sold half AFG yesterday at a miserly $11.30 yesterday and missed out on a further 54 cents today.
Too late, it's in but as I learn to be more of an emotionless trader, I will not post these mistakes again even though I did made a profit on it. I did sold AFG a while back at $12.28 and that turned out to be good as I have traded AFG quite a few times. The entitlement later will also be a bonus.

SEC and Mark, did this rise also take you by suprised?




Not surprised AFG is trading around $12 (incl rights). I think AFG is now nearing fair value as the 15% discount due to the fear of losing the Qantas aircraft leases was unwound. The fear was totally unjustified as I mentioned earlier.

Very surprised at how quickly this discount was unwound, especially given the capital raising.

Soulman, you can't convince me that frequent trading in AFG in the past 18 months would have returned as much as a buy and hold (160%). Come to think of it, I can't see a good reason to trade any stock with a long term uptrend. Let profits run, and top up on any dips.

SEC

[soulman]

I can't really convinced you because long term investor always stick to the stock in fearing if they sold and the stock continues to run, they will feel cheated.

I bought RCD initially at $5.21 and sold half at $8.77 and the last half at $12.28. The reason for selling the first one is to take profits and the second, is because I feel AFG has run too hard and a div yield of 4% is not that attractive anymore. Turned out to be good as I have bought AFG at $10 and selling at $11 a few times since. Although looking at BNB and MBL, div yield don't really play a part in investment bank criteria. It's the growth story that make the share price rise.

[SEC]

Well AFG might have dropped over the last few days (more to do with selling of new shares made available last week than jitters about the Qantas deal), but BNB is going from strength to strength. They're up 1/3 since their profit upgrade in August. As Soulman says the share price performance has all to do with the growth story, and 2007 looks like another good year for the investment banks. My investment bank holds are a good balance to an otherwise resource-heavy portfolio.

SEC (AFG BNB)

[soulman]

Yes SEC. All 3 investment bank in Australia are doing very well. MBL is doing great as well due to the QAN deal and maybe the Alinta deal. Lots of fees.

One other so call investment bank is MFS (which I have luckily purchase before the spike recently) is also doing very well. They do call themselves investment bank but maybe not the true investment bank like MBL, AFG and BNB.

[MoSteph]

Just entered RRT, my biggest holding in fact, and am very curious why it is so cheap. RRT for NZ holders is a great way into international property (with NZ peaking out), great yield (if somewhat uncertain) without those pesky franking credits. I like RRT's approach in that they are conservative in what they buy, but highly agressive in how it's done. They are well geared but if anything went wrong, ALLCO would come to the party IMO.

Thoughts on why I should/shouldn't sell my kidneys and buy more?

[soulman]

Dissapointed by no upgrade. Prices may have run up too quick. Dividend YOY has actually decreased due to the part franking. Haven't had a good look at their result, just the headline figures. Any thoughts?

[SEC]

No upgrade by a company that usually surprises to the upside and they get the usual pummelling. However the fall is most likely temporary. Same thing happened to WOR six months ago and look where it is now....

The fall looks more like market noise in the bigger scheme of things. I wonder if there were significant costs incurred in the Qantas deal/capital raising that shaved a few million dollars off the 1H result.

SEC

[soulman]

I guess I have some chance to average down. Sold some at $12.90 and bought back at $12.50 just a day before the result. Compared to BNB and MBL, AFG should be in favour soon enough. The smacking might be overdone.

[SEC]

quote:Originally posted by SEC

Well AFG might have dropped over the last few days (more to do with selling of new shares made available last week than jitters about the Qantas deal), but BNB is going from strength to strength. They're up 1/3 since their profit upgrade in August. As Soulman says the share price performance has all to do with the growth story, and 2007 looks like another good year for the investment banks. My investment bank holds are a good balance to an otherwise resource-heavy portfolio.

SEC (AFG BNB)


BNB shows the market how to provide a profit upgrade and it got the usual pummelling.... for a couple of hours. But sanity prevailed and BNB has held onto its 10% gain over the past couple of weeks. Consistently providing profit upgrades, onwards and upwards... perhaps $30 next month after staff sell their shares released from escrow.

SEC

[SEC]

BNB does it again - trumps Macquarie for the Alinta bid. Share price didn't make $30 last month thanks to the 'correction' and the bookbuild, but with good news such as the Alinta deal $30 is not far away.

Increasingly pleased I hedged my bets on financial stocks last year and bought BNB to add to AFG. Pains me to say that Allco has underperformed the market since its transformation from RCD due to:
1. A PE re-rating from that of an investment portfolio that pays out 100% of profits to a financial services stock that pays out 60% of profits.
2. The bloody Qantas saga - AFG $10 if the APA consortium fails in its bid, $13 if it succeeds.

SEC

[Huang Chung]

Not holding AFG at the moment, but would look to get back in if they went sub $10 on a failed Qantas bid.

Who wants to own an airline anyway!

[SEC]

quote:Originally posted by Huang Chung

Who wants to own an airline anyway!


According to the brokers not affiliated with the APA consortium, it's all roses and blue sky from here, Qantas is a screaming buy - target price over $7!

They should get real. Their memories are exceedngly short - 9/11, SARS and $78/bbl oil are but a distant memory and apparently none of these sorts of events will never happen again. I detect some brokers have vested interests to see this bid fail, as well as have the joy of rubbing Macquarie Bank's nose in it. Not to mention the Qantas board would probably resign en masse if the bid fails.

SEC

[Huang Chung]

Not to mention the very capital intensive nature of the airlines, and competitive pressures.

Granted, if you were going to invest in any airline worldwide, QANTAS would have to at the top of the list, but the industry is littered with terrible losses and failures over many decades. [xx(]

[SEC]

quote:Originally posted by Huang Chung

Granted, if you were going to invest in any airline worldwide, QANTAS would have to at the top of the list, but the industry is littered with terrible losses and failures over many decades. [xx(]



Well according to the vastly overpaid shït-for-brains brokers valuing Qantas at $7+ such failure will never occur again - "History is Bunk".

Yes the APA owned Qantas also faces risks in the future, but where APA/Allco can add value is to ramp up the aircraft leasing arrangements to reduce the impact of capex.

SEC

[Huang Chung]

Yes, I'm sure the Macquarie / Allco / assorted Private Equity boys have a plan to make a motza through QANTAS, and, assuming they get hold of the company, will probably make it work.

I still think they have picked a company in a very tough industry as their target.

[SEC]

APA has lowered its acceptance threshold to 70% to circumvent a single stubborn holder that holds only 3.9%. Balanced Equity should never have been able to dictate terms against the wishes of the vast majority of QAN holders. Up yours Andrew Sisson!

http://www.featurepics.com/FI/Thumb/20060413/243d4419-1c86-400c-9602-63201f47f025.jpg

SEC

[Huang Chung]

SEC...don't hold back son...tell us what you really think :D:D

Are you happy with this outcome (assuming they end up with somewhere between 70% and 90%) [?][?]

[stevieb]

Let's face it, if they get to 70-80% it's only a matter of time and the right price to get to 90% and then compulsory acquisition!

[Huang Chung]

Posted by Huang Chung 01/04/2007 -

Not holding AFG at the moment, but would look to get back in if they went sub $10 on a failed Qantas bid.

Who wants to own an airline anyway!


Looks like I'll be waving bye-byes to the notion of getting back into AFG under $10.....:(

Oh well, such is life....

[soulman]

No problem there Huang, I sold AFG at $11.36 and UGL at $13.86 yesterday only to find out that today they were both the top mover in the ASX 100. If only for 1 more day. Both cost me for than $2K extra profits. I knew AFG would jumped if they lower the acceptance but not this fast.

SEC, I also hate Andrew Sissons and maybe the UBS for not accepting mostly because they said that QAN is worth much more in a bull market and that's just a lot of bull. QAN is never this high and they are not acting in theor clients best interest if they don't accept. Also, if the consortium can get about 85%, I am sure they will accept due to the liquidity in QAN shares after the offer closes.

[stevieb]

quote:Originally posted by soulman


SEC, I also hate Andrew Sissons and maybe the UBS for not accepting mostly because they said that QAN is worth much more in a bull market and that's just a lot of bull. QAN is never this high and they are not acting in theor clients best interest if they don't accept.

Bit of an extreme view to hate someone just because they have an opinion differing to yours. Also not sure I totally disagree with the view that QAN is not worth more, certainly on market valuation that's true and I've sold most my QAN holding already at lower than the offer. But I've always held the view that the market doesn't really value QAN correctly. while it clearly is a crap industry, QAN is a brilliant company within that industry, it's record and management are in my view quite amazing (given the red ink in virtually every other airline). Never great to fight the market, but it has to be said that some of the APA people actually have a great record for making money out of airline turnarounds so seem to know what they are doing big time IMO. They certainly think QAN is worth having and they came to that decision in an environment where many of the now more apparent more favourable conditions were not obvious.

Time will tell I guess, funny how the market doesn't think QAN is worth more than 5.45 but think that AFG and MBL picking it up at the price adds such value. I don't think both bets can be right myself1

[SEC]

I don't 'hate' Sisson, but I'm pleased he's been exposed for what he really is: a very small fish in the very big ocean of finance.

Soluman, trading uptrending stocks again, you never learn do you:D:D:D;).

SEC

[soulman]

Hate is a harsh word but Sisson is in to get media publicity to show his grandkids later in his life about how good he is as a fund manager and how he save QAN from being a private coy. He too was on the insider trading case in CitiGroup for the Toll/Patrick merger so more media publicity.

SEC, I am on margin lending so sit and wait do cost me money these days with high interest rate. Trading uptrending stock is all I can do. I guess it's better than trading downtrending stock. AFG have not proved themselves yet as a public coy and when is another mini correction coming? June?

[stevieb]

It is of course just possible he really believes that Qantas is worth more, radical thought I know!:D

[SEC]

quote:Originally posted by SEC

The bloody Qantas saga - AFG $10 if the APA consortium fails in its bid, $13 if it succeeds.


I'm hedging my bets now. With the chances of APA achieving its goals falling by the day I bit the bullet yesterday and sold down AFG because it was being priced as if the Qantas bid still had every chance to succeed (yes Soulman I actually sold but it was like pulling teeth!!!!!). Will buy them back after the Qantas saga has been sorted and am quite happy to pay $13 should the bid actually succeed.

SEC

[soulman]

SEC, I reckon there will be 50% acceptance on Friday. Hedge funds will sell because QAN will dive to $4.30 if the bid fail. They are not in the business of losing money. Although, QAN might recover thinking that the consortium will come up with a near $6 bid, which is a little imaginery.

I recently sold PEM for sub $4 and got burnt and lets not forget selling UGL at $13.86 just a few weeks ago. Long-term seems to work but I always time it wrong than right. Selling T3 at $2.45 is also suicide. Lots more story but too depressing to list them.

Whatever will be, will be. The story of "no one ever went broke taking a profit" don't comfort me anymore these day.

[Huang Chung]

Don't quote me, but I think it was the BBY transport analyst who said on Sky Business News (Monday?) that he thought that APA would most likely get over the line, but it would probably come down to the last hour or two before the close. He said it might be like BHP's takeover of Western Mining....at lunchtime on the last day, BHP didn't look to have a snowflakes chance in hell, but just got there by the close that evening.

[soulman]

The market pushed up AFG like it's going to succeed.

SEC, I sold AFG at $12.35 today as well. I think the price rise today is unjustified although if the 50% deal gets there, it might fly past $13.00. They still need 70% though but I am sure they will get 70% if they get 50%.

SEC, I hope you don't have to buy back at $13. Let's hope we both buy back between $11 to $12.

[Huang Chung]

Wow....it looks like APA's bid has failed at the 11th hour. It will be interesting to see the fallout on Monday....

[Huang Chung]

Now there's a report on Bloomberg that says the APA got over the line...

All very confusing!

[Huang Chung]

From ABC Radio:

The consortium wanting to take over Qantas is seeking to keep its bid for the airline alive, despite announcing last night that it had failed.

Paul Cullen reports... Late yesterday, Airline Partners Australia put out a statement confirming it hadn't won the necessary support of investors, because it appeared it hadn't reached the 50 percent acceptance threshold required for the bid to succeed.

That prompted Cassandra Meagher from CommSec to suggest that the $AU5.45 share offer wasn't enought.

"For institutions, it's really that they believe that Qantas is worth more, " Ms Meagher said.

But earlier this morning, the consortium put out a further statement, revealing that a subsequent offer from a large investor had pushed it beyond the 50 percent level.

It's now planning to seek the permission of the Takeovers Panel for the offer to continue.

Oh dear, what a mess......

[stevieb]

Well it's only my opinion but given they had to do some serious arm-twisting to get to 50% and most of the hold outs are still on the register it's going to be hard to get to 70%.

But then again, I think they will come back very shortly after with a better offer anyway. Given the fact that the airline market is looking strong I'd say APA are ruing the fact they didn't pitch the offer say 20c higher and they declared final so quickly. Now they will probably have to go $6+ if they come back.

Cheers

[SEC]

Quite pleased I took out my 75cps insurance policy on Allco last week.

Who would have thought - the entire bid possibly failing because hedge fund managers were staring at each other waiting for the first one to blink. No-one blinked and the deadline passed...

[Huang Chung]

SEC - Who would have thought - the entire bid possibly failing because hedge fund managers were staring at each other waiting for the first one to blink. No-one blinked and the deadline passed...

Beautifully put SEC.

So, it seems that it now comes down to whether the Takeovers Panel will accept any late acceptances. If they say 'nyet', I presume APA could appeal their decision [?] [?]

Yep, it's a bluddy mess alright! [xx(] [xx(]

[SEC]

Dear oh dear - the Takeovers Panel has rejected APA's plea to allow a late acceptance. Probably the only decision it could make though.

The arbitrage hedge funds are going to do a lot of dough on this one and it is going to have a profound effect on how they behave in the future. None of this 'she'll be right, someone will cover for me' attitude when it comes to getting over a minimum acceptance line.

A special raspberry goes to Samual Heyman. What on earth were you thinking?

Unfortunately Allco will be punished too and probably (over)sold back to near $10....

SEC

[Huang Chung]

Now it looks like APA will seek a review of a decision by the Takeovers Panel.

APA is reminding me of the liquid metal terminator in Terminator II..you think it's down for the count but it comes right back at ya! [}:)]

[soulman]

Bid has failed. Good decision by the panel not to accept the late acceptance, otherwise this could spell trouble for future T/O.

APA is considering a new bid. Will this be the same old $5.45 or maybe $5.60. I am looking to buy back in AFG but at what price SEC? I don't think AFG will drop to $10 although if they have a profit downgrade.

[mark100]

Hi soulman and SEC and other AFG followers,

I'm surprised AFG has held up so well today.

I got out of AFG immdediately after the interim result at $12.55 as I regarded it as a poor result. Got back in a few weeks ago at $11.15 and then out again last week at $12.20.

Now at what price do we buy back?

I am a bit concerned about how AFG is tracking for its full year result. The interim result was poor and left them needing a big second half simply to produce 20% EPS growth let alone 'at least 20%'.

As it currently stands, AFG may have spent a lot of money on the bidding process. If the bid is successful these costs will be simply be capitalised to the cost of acquisition. If it's unsuccesful they will have to be expended this half. How the bid costs are split up between the bidding parties I don't know. What we do know is AFG would have incurred some costs plus it has been a major distraction to AFG management (as admitted by David Coe) which may have some impact on AFG's other activities.

I may be corrected after AFG's full year result but my current line of thinking is that RCD shareholders overpaid for Allco. Had RCD remained separate there is now little doubt in my mind it would have produced EPS growth well in excess of 20%. I am a supporter of the concept of the merged entity however I think Allco shareholders were greedy and made RCD shareholders overpay for earnings that were very one-off in nature.

Anyway, AFG is a good business and its a buy at a certain price. I'm just not sure what that price is at the moment.

For fans of the old RCD, I will once again remind you of MBR which is the 'new RCD'. Its run by Mark Phillips and has poached many of the executives that used to run RCD. Share price has risen strongly form the $1.25 issue price in November.

cheers

[Footsie]

can someone tell me why RRT is so cheap

ie on a forecast yield of 12.7%?


Fisher seem to agree. i see they are buying

[COLIN]

quote:Originally posted by Footsie

can someone tell me why RRT is so cheap

ie on a forecast yield of 12.7%?


Fisher seem to agree. i see they are buying


I would like to know the answer, too. Bought some a few weeks ago. Liked their story, the yield of course, and the wider spread of risk into the international property arena.

[SEC]

quote:Originally posted by soulman

APA is considering a new bid. Will this be the same old $5.45 or maybe $5.60. I am looking to buy back in AFG but at what price SEC? I don't think AFG will drop to $10 although if they have a profit downgrade.

I think AFG is still holding up because APA isn't quite finished yet...

If APA bid fails and declares no revised offer there will be a profit downgrade due to expensing of costs associated with the bid.

Mark, now that MBR may get to critical mass in terms of market cap and liquidity after today's equity raising announcement I'm looking into this one further. Re RRT, I note the div is unfranked.

SEC

[COLIN]

quote:Originally posted by Footsie

can someone tell me why RRT is so cheap

ie on a forecast yield of 12.7%?


Fisher seem to agree. i see they are buying


I'm interested as to the source of this information, Footsie? (I presume you mean Fisher Funds, etc?) I have had a quick look through Carmel's latest newsletter but can't find any reference to RRT.

[soulman]

Anyone bought back AFG yet? I am ready to press the trigger, although at a price below $11. It has been a slide but Coe in AFR all but confirm that guidance is still intact.

[soulman]

OK, I am back in AFG although I do think they might drop lower to about $10.50. I was lucky enough to sell at $12.35 just before the fallout so at this price, it seems to be a great escape.

[SEC]

quote:Originally posted by SEC

Unfortunately Allco will be punished too and probably (over)sold back to near $10....


Almost time to buy back my shares I sold for over $12 in May. It's a shame Allco has got tarred by the Qantas bid, but that's the fickle market for you.

SEC