IVG – JPM Research on property values
A friendly reader forwarded me a current equity research report from JPM about IVG.
Not surprisingly, they estimate the value of the share as zero:
Our EVA based European
Valuation Model implies zero value for IVG ordinary equity as a going concern, while a DCF driven revaluation implies zero equity value on the existing balance sheet. We therefore lower our Mar-14 EVM based price target from €2.22 to €0.01, and await the announcement of restructuring plans over summer 2013.
Although one might wonder, why they had a 2.22 EUR price target before. Much more interesting is that they actaully come up with an asset value for the IVG portfolio which looks as follows:
Although they use slightly different adjustements, thei asset value is very similar to what I calculated a couple of weeks ago:
|Intangibles||251||0||253||0||100% write off|
|Inv. Property||3,964||3,398||3,654||2,920||scaled to 7% yield|
|Financial Assets||189||142||174||131||25% discount|
|equity part||95||71||84||63||25% discount|
|DTA||404||0||336||0||100% write off|
|Asset Management||275||318||1.5% of AUM|
|Marekt value caverns||163||140||50% of disclosed adj.|
Additionally, they calculate “Bull” and “bear case” scenarios:
The bear case scenario clearly would not leave a lot for convertible holders.This clearly shows the risk of the implicit “leverage” of the secured loans via the convertible.
Although the JPM research looks a little bit superficial especially with regard to the liability structure, it is definitely worth to look at in order to get a better feeling for the underlying property values.
Their base case would imply even “full recovery” for the convertible and hybrid, although I think they haven’t modeled the liability structure correctly.
In general, their asset valuation does not look to different from mine,so for the time being I don’t see a reason to sell the convertible at current levels. Also there seems to be no reason to approve any debt for equity swaps.
However both, equity and hybrid capital seem to be clearly out of the money in most scenarios if one takes into account the full liabaility structure.