I am a holder so the following comments are inevitably biased. Based on my read of the annual accounts, if the balance sheet is revalued based on the standalone values for the individual units, it equates to about $2 per share ( this removes any benefit for the Aveo fee model). Interestingly, a reduction in these standalone property values of ~5% (which is arguably close to the national price decline over the past 6months) brings the sp down to about the current sp. However, this doesnt acknowledge any value accruing to Aveo for the services/ network/benefits they provide. Also, if mgt didnt strongly believe they could realise close to NTA under the strategic review, they wouldnt have started the process because 1) crystalising a transaction will likely set a market value for the rest of the portfolio and 2) if they dont proceed, the sharemarket wont react well. Accordingly, I see a transaction as more likely than not at close to NTA, even if its not a big transaction. I also dont currently see a major debt issue here and consider this business as a lot more creditor friendly than a developer given significant recurring fee income (although clearly not as good as a REIT). The class action and regulatory risks however remain key overhangs that will likely persist beyond the strategic review process.
AOG Price at posting:
$1.56 Sentiment: Buy Disclosure: Held
