Ausgroup

Ausgroup: On its sale and leaseback of it Tuas waterfront property to Boustead Singapore, OSK DMG estimate that Ausgroup could recognize a profit of A$5m for FY14F, but would also incur A$2m in net rental cost over the next 12 years. In other words, the deal boosted the company’s near-term earnings, but at the expense of its long-term profitability. On the OMV of the property, Boustead estimated the value at $44.6m based on income capitalization and DCF, while Ausgroup valued the property at $22.8m based on vacant possession excluding PP&E. The disparity brings about the question as to which figure investors should employ. DMG see Ausgroup's rationale of "realizing the property at a good value" as weak and that the sale reflects a price below the property’s actual fair valuation and a leaseback at high yields. OSK DMG has a SELL rating on Ausgroup and TP of $0.33.