A partial sell down of the 59% controlling stake in Australand (ALZ) held by CapitaLand of Singapore is underway after Australand’s shares went into a trading halt yesterday.
The halt came a day after the company updated the market on its 2013 outlook and an early guidance for 2014.
The update and outlook were quite confident – bullish even, despite some more minor impairments in the group’s Queensland residential business.
Brokers said the guidance seems to have cleared the way ("a cleansing statement”) for the sell down, which is said to be around 20% of the stake, or around $400 million worth of shares.
CapitaLand confirmed the partial sale in a statement just as the market closed.
It said it was looking to sell 115.66 million Australand shares in the placement. The price was not given, but at the halted price level of $3.75, the stake has a value of around $433 million.
Obviously the stake will be placed at a discount to market, which will bring the value back closer to the $400 million level, which is what market sources were suggesting earlier in the day.
The halt will allow brokers to find buyers for the holding.
CapitaLand said in January it was reviewing the ownership of the shares, but in March said it had decided to maintain the "status quo".
But as the property sector has improved, so has Australand’s share price.
The company’s residential business has improved over the past nine months, even after a small group of impairment charges revealed in Tuesday’s update.
And there seems to be more interest in property as the residential price surge has emerged in the past six months.
Australand shares were down 3% at $3.75 before trading was halted yesterday. They had risen to more than $4 last week when speculation about the fate of the Singaporean group’s holding first emerged in the market.
ALZ YTD – Sell down at Australand keeps the property sector on the boil
JP Morgan acted for CapitaLand when GPT Group launched a bid for most of Australand’s business last year. GPT is now bidding for the Commonwealth Property Office Fund, in competition with Dexus and a Canadian investment group.
In its update on Tuesday night, Australand said it expects to deliver an operating profit after tax result of approximately $148 million for the December 31, 2013 year, "which is at the upper end of previous guidance of 3-4% EPS growth for 2013."
The company said to expects to pay a final distribution of 11.0 cents per stapled security for the second half, resulting in full year distributions of 21.5 cents per stapled security. While the company’s gearing at December 31 "is expected to be below 30% and net tangible asset backing per security is currently estimated to be $3.54 (30 June 2013: $3.57)."
“The Group continues to make solid progress across each of its divisions in delivering on our 2013 full year targets and, at 31 October 2013, sales targets at our top twelve residential projects were 95% secured,” the company said in Tuesday’s update.
And looking at 2014, Australand said that subject to there being no material deterioration in current market conditions, the Group is budgeting to deliver growth in 2014 operating earnings.
"This is supported by high occupancy and fixed increases in rental income from its Investment Property portfolio and a strong level of Residential contracts on hand. The Commercial & Industrial forward workload for 2014, however, is expected to be below historic levels.
"Following a review of the inventory carrying values of its Residential, Commercial and Industrial development assets, an impairment of approximately $65 million will be taken as at 31 December 2013. The adjustment to carrying values reflects the reassessment of development timelines and the adoption of new strategies to accelerate capital recovery.
"Nine projects were identified as requiring an adjustment to carrying values comprising four Residential projects totalling $35 million and five Commercial & Industrial projects totalling $30 million as listed below."
Approximately 90% of the impairment relates to projects located in Queensland and eight of the projects were previously impaired. While trading conditions in Queensland for the residential sector have improved, sales rates remain well below historical averages," the company said in Tuesday’s update.
“In the industrial and office sectors demand has remained relatively subdued for longer than anticipated. While recent indicators support an improvement in business sentiment we expect tenant demand, particularly in Queensland, to remain challenging in the near term.”
"Draft independent valuations for approximately 25% of the Investment Portfolio, by value, have been received and the balance of the portfolio will be subject to directors’ valuation. As a result, the gain in value for the total portfolio as at 31 December 2013 is likely to be approximately $44 million for the full year, reflecting an increase of approximately $27 million in the second half of 2013," the company said.
The sell down will result in Australand’s shares becoming more popular among investors.
The free float will rise by a third to around 60% of the issued shares, which will also mean higher weightings in some indexes. It will also mean more competition for investor dollars for the likes of competitors such as Mirvac and Stockland. And it also means a bit more choice for investors interested in the sector.
