RE: Broker 5% Estimates24 Mar 2022 11:17
It's a good question! If the 5% value turns out to be materially lower than the published broker estimates, it will at least be entertaining to watch the analysts re-paper in hindsight. I wonder if SD has met with them this week, and (if so) whether those estimates will be “updated”…
To be fair though, "5% re-papering" is already underway elsewhere. Here are some valuations (from this 'board) for the 5% descending over time during the last 6 or so months:
3/9/21 “…close to $1.2bn for the 5%.”
9/9/21 “…$300m $500m $800m ?”
29/9/21 “…FMV 5% stake will be £300m plus”
5/10 “…$300m that’s a decent price and a fair price”
31/12 “…$200 - 250m in cold hard cash”
23/3 “…the lowest valuation NCM can now our on this is $100-150m”
My view remains that it is better to consider the 5% as the last instalment of the farm-in rather than as an advance on the final 25%. The levels discussed here since the SD meeting(s) look more realistic to me.
I fully expect the JV partners to reach agreement on the 5%. Whatever happens behind closed-doors during the process, the outward presentation will be relatively swan-like, because that is how professionally managed businesses conduct themselves. The price will be lower than some posters were hoping for - partly because of the “three-factors-that-are-never-permitted-to-be-mentioned-on-this-board*”, and partly because future development potential will have to be risked one way or another. In simple terms, Fair Market Value =/= Future Market Value. I remain optimistic that the deal for the 5% will be a material positive for GGP’s funding position, but I am sceptical as to whether it will prove to be the near-term positive inflection point in sp that some have anticipated. We may see some volatility - in price and on this board - as a result when it is announced.
The “Gated Feasibility Study to Execution” in q4 still looks to me like the point at which the real excitement will start, because it is then that the project might be dressed to the nines for capital raising purposes. If so we may get an opportunity to find out how wholesale capital providers (both debt & equity) are prepared to value the project, and I am sure that NCM will throw all it has behind this. I think their interests are best served by maximising value perception at this point, rather than now.
At the end of the day the only sure way for GGP to realise the “future market value” of the 25% on which it has a strong grip will be to hold this interest for the long term, and it has every opportunity to do this. If (as I suspect) NCM really want 100% then GGP will have an opportunity to exit at a premium, perhaps at the FS point. Q4 will present some big decisions for SD and his team, and we’ll get a better indication then of how big the prize is.
[*tax, financing costs and the time value of money]
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