cpk update

Called CP1 Wednesday and spoke to a lady to try and get a frank assessment of the situation.

While things are admittedly slow, the vibe was that things are perhaps not as catastrophic as it might appear for now – this is at least the vibe they’re putting out. The lass I spoke to put the 2008 loss as more a “break even” than loss.

It seems that along with the land necessary for Mariners Cove, they originally purchased most of the beach front at Martha's Cove. Some of this land is being sold undeveloped (to other developers), which apparently was always part of the business plan for cashflow/ pipeline to feed other projects – the inference being that this is not any sort of fire sale. The woman I spoke to also stressed that there were not just 1 or 2, but “several” parties interested in the land, as it is all prime beach front. This all could be true or perhaps spin; I’m not sure (Townsville ring a bell?). She assured me (and I have no reason to doubt her) that the market will be informed of any positive developments as they happen.

As far as Mariner's Cove goes, a lot is pinning on the finishing of the Marina Berths in October. Supposedly this is where interest has outstripped supply by potential buyers (I think there is a shortage in the bay of safe berths). The other completed developments at the cove seem to be going slow.

I asked if there was likely to be a dividend this year at all – interim or full year. It seems unlikely, as money will be poured into the new building at Broadbeach (Azzura from memory) that is 80% pre-sold. Cash flow is what is needed at the moment to complete these projects and get paid.

It's worth adding that the $136 million loan @ 12% interest is fully capitalised. This means that there are no loan servicing payments - a big plus when cash flow is tight (though not great for CIY the lender). Interest is only payable on completion and settlement of projects.

A theory I have: The market being targeted by these developments – wealthy early retirees - may well be deferring early retirement due to the hammering their super funds may have taken over the past 6 months. CPK was only listed in 2003, at the start of the Last bull market. As such, they have never had to weather a downturn in the property market. It will be interesting to see how they manage it (CIY more to the point).

The share price is oversold for sure, but bear in mind the stock has historically been undervalued – even when the market was good and paying consistently sweet dividends.

Short term at least, in the absence of a dividend, I’d be surprised if it punches back through 15c until some substantial good news is received or there is a drastic change in market sentiment.