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  1. #1
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    Default Asset Plus (APL)

    Cant seem to find a thread on here so will start a thread here.

    Was wondering what are some of the thoughts of the fund so will kick it off with my take.

    One of the smallest (57m market cap) and poorest performers (down ~42% ytd) in the property investment currently listed on the NZX. One of the more unlucky funds which had to withdraw their capital raising in early March that were meant to fund development cost at Murone lane (future office space for Auckland council https://www.nzherald.co.nz/business/...ectid=12295344).

    Current Portfolio (Aug20)
    - Eastgate $47.40m : Chch mall and recently announced a new lease with RBD for a new buidling on site maybe Tacos or KFC? Currently makes up ~39% of their active rental income (sub 95% occupancy)

    - Stoddard Road $38.50m : Small shopping center complex in Mt Albert with 100% occupancy ~28% of rental

    -35 Graham Street $57.50m Slight problem child, largest valued property currently lease to Auckland council but is due to end in Dec21. They have yet to decide on what development option will be next tho it range from almost a complete rebuild to mild refurbishment, with the earlier requiring a significant capital injection.

    Munroe Lane (bare land) $7.50m : Empty land in Albany that was meant to be leased to Council upon completion. Subjective to market condition they would most likely be looking to a capital raise of some sort. (Withdrew capital raising of 100m in Mar)

    Kamo (bare land) $2.50m : NM

    Their debt level is on the upper end with LVR just about ~34% and are trading at about ~63cps NTA and about 40% discount at current trading price. Being a small property fund they have always traded at a slight discount of about ~10% pre-covid.

    Their financials are ok at best, being a small property fund does means they do not enjoy the same level of cost efficiency however have managed in the past to somewhat sustain an annual net dividend payment of 3.6cps however have indicated recently this will likely drop by half for this FY at the minimum, which is still a decent yield.

    Their main downside risk would be just the lack of scale in their property portfolio ~7% doesnt generate any income and will need significant capital to do so and their largest income source that is due to have their lease end in the next year. So quite likely to see the dividend tap to be turned off in exchange for more capital being raised.

    With all that being said, there are decent value proposition in this company and maybe some potentials to be a takeover target given it size and discount. Also Interesting to note that the properties are all managed by Augusta (recently taken over).

    Hopefully this can kick off some discussion and keen to hear what opinions if any might be

  2. #2
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    Any opinions on this new capital raise?

    I had resigned these to my bottom drawer...

  3. #3
    Ancient Mariner HKG2301's Avatar
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    Thumbs up

    I have a chunk of APL shares, so I'm going to grab the full allotment of the retail Entitlement Offer later this month, to protect my holding. And some, at $0.30 per share.

    I'm pondering today's $12M share Placement as well, which is at the same price, $0.30.

    Note: that Placement Offer (different from the Entitlement Offer) is today only, and open to all. You do not need to be an existing shareholder, as I read it.

    Writing this, I gave Direct Broking a call and they've taken my Placement order over the phone. Added bonus: no brokerage fees. They are all absorbed as part of the placement.

    Anyone else buying/bought in...?
    Last edited by HKG2301; 10-09-2020 at 02:40 PM. Reason: spelling

  4. #4
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    Quote Originally Posted by Sneakybearmarket View Post
    With all that being said, there are decent value proposition in this company and maybe some potentials to be a takeover target given it size and discount. Also Interesting to note that the properties are all managed by Augusta (recently taken over).
    That was my thinking. A prime takeover target...

  5. #5
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    I think I'll keep the faith and buy my share too.... Alas I missed out on the placement

  6. #6
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    The new capital raise come with no surprise and it was only a matter of time. The amount being sought after is actually lower then expected as the cost to develop Munroe is in excess of 100m they did highlight that divesting Stoddard is on the table and wouldn't be too surprise if they did.

    I expect them to do a further raise in the future as they would need a bit of capital to refurbish or redevelop Graham and for any future development out in Kamo.

    Interesting to note that they are committed to their cash dividend of 1.8cps but will be partially funded through debt.

  7. #7
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    Huge discount to NTA, wonder if Mark Francis and co might have a play at this stock with their takeover funds from Augusta?

  8. #8
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    Huge development risk with this one. Size of the new development is double the present market cap. Significant possibility of major construction cost overruns in the current market. Involvement of Mark Francis is a very bad thing as far as I am concerned. Cheap because its very small, very risky and Mark Francis is involved. Not for me.
    No butts, hold no mutts, (unless they're the furry variety).

  9. #9
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    Share price took a huge knock in March - three knocks really, thanks to Covid which struck with impeccable timing.

    In the space of a couple of weeks, they had to cancel a 100m capital raise, cancel the dividend and publish a dramatic reduction in portfolio valuation (some would say overly-dramatic) of -$19.1m. The share price has yet to recover.

    Last week, the portfolio was revalued again, in time for first half results on 31 Sep. This put $11.35m back on the books and bounced the NTA back up to $0.63 per share.

    As of June, Augusta Capital (which manages APL) held almost 20% of APL's shares. Not sure what their holding is now, since they were themselves taken over by ASX-listed Centuria Capital in July. Makes you think, no?

    Lastly, Forsyth Barr's research team wrote this of APL back in July: "capital shortage... continues to hamstring APL's strategic progress. The capital dilemma could be resolved through capital partnering, asset sales, and/or a heavily discounted capital raise. As such we prefer to watch from the sidelines".

    Well, now we have the capital raise... and at that price, I'm buying.

  10. #10
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    And, perfect timing - Forsyth Barr has a brand new research paper on APL out today, with a rating of NEUTRAL, target price $0.36.

    Lots of detail on the capital raise, plus this update on substantial shareholders:

    Augusta Capital: 18.9%
    Salt Funds Management: 14.7%
    ACC: 8.6%

    And as I write this, I see APL has released a statement on yesterday's placement which was oversubscribed. Shares will begin trading normally again today and the Retail Entitlement offer for existing shareholders will be open from 15-29 Sep.

    https://www.nzx.com/announcements/359586

  11. #11
    Ancient Mariner HKG2301's Avatar
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    For interest, I've just received my allocation from yesterday's placement and I've been allocated 32.7% of my requested shares.

    So I guess the placement was > 3 times over-subscribed?

  12. #12
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    Quote Originally Posted by HKG2301 View Post
    For interest, I've just received my allocation from yesterday's placement and I've been allocated 32.7% of my requested shares.

    So I guess the placement was > 3 times over-subscribed?
    Sounds about right to me

  13. #13
    percy
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    Quote Originally Posted by Sneakybearmarket View Post
    Cant seem to find a thread on here so will start a thread here.

    Was wondering what are some of the thoughts of the fund so will kick it off with my take.

    One of the smallest (57m market cap) and poorest performers (down ~42% ytd) in the property investment currently listed on the NZX. One of the more unlucky funds which had to withdraw their capital raising in early March that were meant to fund development cost at Murone lane (future office space for Auckland council https://www.nzherald.co.nz/business/...ectid=12295344).

    Current Portfolio (Aug20)
    - Eastgate $47.40m : Chch mall and recently announced a new lease with RBD for a new buidling on site maybe Tacos or KFC? Currently makes up ~39% of their active rental income (sub 95% occupancy)

    - Stoddard Road $38.50m : Small shopping center complex in Mt Albert with 100% occupancy ~28% of rental

    -35 Graham Street $57.50m Slight problem child, largest valued property currently lease to Auckland council but is due to end in Dec21. They have yet to decide on what development option will be next tho it range from almost a complete rebuild to mild refurbishment, with the earlier requiring a significant capital injection.

    Munroe Lane (bare land) $7.50m : Empty land in Albany that was meant to be leased to Council upon completion. Subjective to market condition they would most likely be looking to a capital raise of some sort. (Withdrew capital raising of 100m in Mar)

    Kamo (bare land) $2.50m : NM

    Their debt level is on the upper end with LVR just about ~34% and are trading at about ~63cps NTA and about 40% discount at current trading price. Being a small property fund they have always traded at a slight discount of about ~10% pre-covid.

    Their financials are ok at best, being a small property fund does means they do not enjoy the same level of cost efficiency however have managed in the past to somewhat sustain an annual net dividend payment of 3.6cps however have indicated recently this will likely drop by half for this FY at the minimum, which is still a decent yield.

    Their main downside risk would be just the lack of scale in their property portfolio ~7% doesnt generate any income and will need significant capital to do so and their largest income source that is due to have their lease end in the next year. So quite likely to see the dividend tap to be turned off in exchange for more capital being raised.

    With all that being said, there are decent value proposition in this company and maybe some potentials to be a takeover target given it size and discount. Also Interesting to note that the properties are all managed by Augusta (recently taken over).

    Hopefully this can kick off some discussion and keen to hear what opinions if any might be
    Have you walked through Eastgate Mall.?

  14. #14
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    Quote Originally Posted by percy View Post
    Have you walked through Eastgate Mall.?
    Yeah lol. It's pretty depressing isn't it Percy?!
    Every second shop seems to be empty and boarded up.
    Last edited by dubya; 11-09-2020 at 10:18 PM.

  15. #15
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    Quote Originally Posted by percy View Post
    Have you walked through Eastgate Mall.?
    Yea its not the greatest, however given their headroom and the need for future funding... they have already expressed their intention to divest either Eastgate and or Stoddard to fund future development cost. Not sure how much I like the idea of restructuring their portfolio to become much more or entirely exposed to Auckland office sector.

  16. #16
    Ancient Mariner HKG2301's Avatar
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    Quote Originally Posted by HKG2301 View Post
    ... plus this update on substantial shareholders:

    Augusta Capital: 18.9%
    Salt Funds Management: 14.7%
    ACC: 8.6%

    ...and the Retail Entitlement offer for existing shareholders will be open from 15-29 Sep.
    Announcement from Westpac this morning, that they've increased their holding in APL from 18,832,528 shares (11.63%) to 41,105,763 shares (15.96%).

    http://nzx-prod-s7fsd7f98s.s3-websit...873/330862.pdf

  17. #17
    Ancient Mariner HKG2301's Avatar
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    And an update from Salt Funds Management Ltd, increasing their holding from 23,812,330 (14.7%) to 51,341,976 (19.9%).

    The release also notes: "In addition Salt were allocated (but not yet settled or allotted) 2,000,000shares under the retail offer, with settlement and allotment expected to occur on 02/10/10. Assuch these are not included in this notice".

    http://nzx-prod-s7fsd7f98s.s3-websit...950/330968.pdf

  18. #18
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    And from ACC, increasing their holding from 13,877,373 (8.57%) to 31,086,689(12.07%).

    http://nzx-prod-s7fsd7f98s.s3-websit...949/330967.pdf

  19. #19
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    Encouraging news, like the fact that the council are anchor tenant in new development. Expect price to firm post issue - disc holder.

  20. #20
    Ancient Mariner HKG2301's Avatar
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    Quote Originally Posted by HKG2301 View Post
    Lots of detail on the capital raise, plus this update on substantial shareholders:

    Augusta Capital: 18.9%
    Salt Funds Management: 14.7%
    ACC: 8.6%
    So the latest update on substantial shareholders after the initial placement seems to be:

    Augusta Capital: 20% *
    Salt Funds Management: 20% *
    Westpac: 16%
    ACC: 12%

    * Allotment of additional shares is calculated to maintain a less than 20% shareholding in order to preserve APL’s PIE status.

    The Retail Offer closes on 29 Sep with settlement on 2 Oct 20.

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