Daily ShareChat: Property for Industry

Property for Industry's (PFI) shares are trading ahead of both their net tangible asset backing and the broking firm's discounted cashflow valuation (DCF), says McDouall Stuart.

"With possible risk of further weakness in asset values, some easing in the share price towards DCF value is likely," it says. The broker values the shares at 99 cents compared with the $1.20 share price at the end of last week.

Still, the company has sold properties in the past 16 months and the sales in 2009 were above the December 2008 book value. PFI has used the proceeds to reduce bank debt, even though its gearing (43.5%) remains below the company-imposed maximum.

"Lease renewal and lower management fees are mitigating the impact of rent reduction from property sales. The company continues to investigate buying opportunities but have yet to identify one that meets its investment criteria."

PFI owns 56 industrial properties valued at $350 million and predominantly located in Auckland. Its occupancy rate was 97.9% at June 30 and its weighted average lease term was 4.47 years.

McDouall Stuart is forecasting net profit will ease from $15.7 million in calendar 2008 to $12.4 million this year and to $13.3 million in 2010 before rising to $16.1 million in 2011.

BROKER CALL:  McDouall Stuart rate Property for Industry as sell.

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