This stock may depend on its bankers for survival, but it...

This stock may depend on its bankers for survival, but it definately does not depend on its bankers for us to make some profit.

The risk of default is a strong possibility with AEZ's interest cover only 1.2x.

AEZ should be aiming to sell off its non core assets, and improve its gearing, and in turn its interest cover.

As this stock is trading well below its NTA, its has the ability to remain profitable for an investor even after liquidation.

The numbers stack up as follows:

A full portfolio selloff over 2-3 years at a discount of 10% to last book value sees the investor returned around 12c in the form of a capital distribution.

300% in 2-3 years is a conservative estimate and assumes that property prices will fall a further 10%.

The actual risk as I perceive it is management. If management continues to operate at a loss (income, not capital), then they could potentially drive this baby into the ground.

Management needs to do one of the following.
A) Announce a windup similar to that of GJT.
B) Put the company into maintenence mode, bare essentials and await the recovery.

I would prefer option A.

I also think that this stock would be a great target for Nick Boltons new vulture fund.

The downside risk is not as severe as some percieve it, due almost soely to the discount at which AEZ is trading.

SS