Some support for Mirvac’s hacking of its 2009 distribution from investment analysts yesterday, with one warning the 40% cut could apply next year.
Friday’s announcement from Mirvac is being examined by the ASX, according to media reports.
The exchange is said to be assessing last Friday’s market update and distribution cut by Mirvac, against its "don’t know" reply 10 days earlier to an ASX reply about a sharp price fall.
The ASX told the Melbourne Age that it would look at the information in last Friday’s update and the stated reasons for the 40% cut in distribution to just 8c to 9c for 2009, against previous advice in the reply to the price query, that the company knew nothing that would explain the slump in the shares.
Mirvac securities fell from 80c to an all time low of 59.5c, which drew the query.
After the reply, the shares then rebounded past 90c, before Friday’s surprise update knocked them lower again.
The securities closed down again yesterday, losing 3c, or 6.1% to 77c, after touching a low of 76.5c.
The company justified the cut on the basis of preserving cash flow for the rest of 2009 and in 2010.
But that danger (or negative cash flow is distribution was held unchanged) should have been known earlier.
Mirvac said on Friday the reduced dividend payout policy would benefit the company’s cash flow position, which would move from an original estimate of negative $110 million to a positive position for the remainder of 2008-09 and 2009-10.
The company paid a distribution of 7.8c in the six months to December 31. There now won’t be a distribution to unitholders this quarter and the one in the June quarter could range from 0.2 of a cent to 1.2c.
Some brokers liked the move (ignoring the odd timing and the lack of clarity in the reply to the price query).
Goldman Sachs JBWere for instance said:
"We believe in the current environment A-REIT investors are more balance sheet and liquidity focused. Accordingly, we think MGR’s continued focus on capital management is sensible.
"A key focus for MGR remains its ongoing compliance with interest coverage covenants.
"At this stage, we understand MGR intends to maintain this revised DPU policy for FY10. While MGR currently pays quarterly distributions, we would not be surprised if management were to seek to obtain shareholder approval to amend this policy to half-yearly payouts in FY10."
And Citigroup analysts said:
" We were surprised with the depth of the cut as MGR had previously guided taxable income excluding asset sales to 10-11cps.
"With a 4.8% dividend yield and only just reiterated DPS guidance last month, the dividend cut reflects the extent to which Mirvac must operate prudently in an unrelenting capital constrained environment."
Meanwhile FKP Property shares opened sharply lower yesterday after revealing that it sold an office tower in Geelong in Victoria, and then rebounded as the punters reckoned there was more mileage in the stock.
The stapled securities fell more than 13% at the opening yesterday to 72c, steadied, then scooted back to 86.5c, up 5.5c before climbing to close at more than 10% at 91.5 c.
On Friday there was a very odd and explosive surge in late trading that saw the securities jump 23c in less than an hour on claims two big shareholders were going to bid for the company and carve it up.
Analysts said yesterday that the market action would have been driven by news FKP had sold the Transport Accident Commissions’ headquarters, known as TAC House in Geelong, south-west of Melbourne, to a private syndicate.
TAC House was completed last December and handed over to the TAC in January.
FKP did not disclose the price, saying it would do so when sales went through. Some analysts claimed the price could be around $85 million.
FKP’s executive general manager, Evian Delfrabbo, said in yesterday’s statement that including the Geelong sale, the group has raised about $325 million since June last year.
And once the company completes the deal with Cromwell Corp on the Energex building in Brisbane, around $500 million of assets will have been sold or in the process of being disposed of.
