Hi allIve looked at what the balance sheet, gearing, NTA and...

Hi all

Ive looked at what the balance sheet, gearing, NTA and underlying profit will most likely look like post sale of the US assets to blackstone.

According to the announcement, NTA is expected to be 41c and gearing 43%. Keeping this in mind, I have come up with the likely look of the balance sheet.



Cash.... 85000 (000s)
Aust Property (Equity Controlled)...... 1,443,475
Aust Property (Controlled Operations).....107,650
Option Karingal.....48,600
Total Assets..... 1,684,725


Debt Facilities (prior to sale)...1,126,600
Loan to CNP....111,000
Total Liabilities....1,237,600


Pay down of Aust debt (from sale of US Assets)...500,000

Revised liabilities total....... 737,600.00

Net Equity....947,125.00
NTA per share....41c
Gearing.....43.8%



The Aust Property values come from page 16 of the Appendix 4d announcement. It also agrees with the HY presentation. The Option to purchase Karingal is noted in note 3(iv) of the appendix 4d announcement.



The cash balance is about $12m lower than the 31 Dec 10 balance shown in the balance sheet. Ive assumed that the cash balance remained constant after taking into account the closure of the equity hedge at the beginning of Jan for about $12m.

The Debt facilities prior to sale is the total amount of Aust debt facilities are shown in the HY supplemental. Below is a summary of these debt facilities.


CER Syndicated Finance Facility?.$171.0
CER/CAWF Syndicated Loan Facility?..$50m
Bank - CER Cash Advance Facility?..$336.6m
CER Commercial Bill Facility?..$94.0M
CER/CAWF Syndicated Loan Facility?..$100.0
CSIF B (Club Facility)?? $219.5
CMBS 2006-1 (Aust)??. $155.4

Total: $1.126B

The only other meaningful liability would be the $111M loan to CNP, which I am assuming would be paid to CNP once the sale proceeds are received. What CNP does with this I am not sure but I assume their debt holders would take possession of this as the pie allocated to CNP shareholders does not include this.

The revised liabilities total would be approx $737M after the $500M sales proceeds have been apportioned to CER?s Australian debt.

Please note for materiality purposes I have not looked at accounts receivable nor payable so there may be a slight discrepancy in the total liabilities above I have quoted.

However as the NTA and the gearing I have come up with matches CER?s announcement, I?d say Im in the ball park with regards to the balance sheet items.


Estimated P&L:


NOI: $120M (Taken from Page 1 of Aust property supplemental. HY NOI shows $60.6M but I have assumed an annualised $120M)


Expenses:

Aust Debt $737M

Weighted avg cost of debt: 7%

Annual interest charges: $51.59M



Underlying profit: $68.41M or 3c per unit (earnings yield of 9.4% on current share price)


Points to note:

Amalgamation of funds has not been considered. It is assumed that any amalgamation that takes place would be to the benefit of CER unitholders so the analysis conducted here is a base case scenario.

The NOI of $120M assumes no rental growth in the HY ending June 2011.

It also assumes no reduction in management charges as Centro MCS surrenders its RE status and possibly gets transferred to CER or a CER subsidiary. Presently 10% of our annual base rent gets paid to the RE for management related costs. Annual Base Rent was $142M as at 31 Dec 10.

A weighted average cost of debt of 7% is fair. This will still be about 200 basis points above the cash rate. The gearing of 43% will allow CER to negotiate lower margins on its debt. Also if they go down the CMBS debt issue route, demand will be there, which will push margins down also. It has already been documented that margins on debt have lowered across the board as a result of Centro?s US sale.

If CER elected to payout 75% of its profit as distributions, then it would pay out approx $51M or 2.2c per unit. This is a div yield on current share price of 6.9%. The retained earnings could be used to further pay down debt and increase underlying profits for future periods. Also CER should continue to generate strong rental growth on its portfolio.

Still very much looking forward to CER's future!

Cheers