discount to nta + us sale = opportunity, page-3

sle

We must have read the same Morgan Stanley research tactical idea (posted below for those interested).

November 2, 2010
Charter Hall Office REIT (CQO.AX)
Research Tactical Idea

We believe the share price will rise in absolute terms over the next 60 days.
We are recommending investors buy CQO as a deep value play with a near-term catalyst. We expect the proposed sale of
a 50% interest in CQO's US portfolio to wholesale investors at or close to NTA will re-rate the stock by 25% in the short-term. With CQO trading on a 33% discount to its FX adjusted NTA of A$4.05, the current share price implies a further 52% NTA discount for the US assets (after a 31% write-down since the peak), which we believe is overdone. With impending catalysts (debt restructure, Maguire JV exit & US disposal) that could drive 25% upside, we recommmend increasing exposure before it is priced in. In the long-term, we see further upside from recovering asset values and commercial rents and a lower discount to NTA.
We estimate that there is about an 80%+ or "highly likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the scenario.

Stock Rating: Overweight
Industry View: In-Line