Daily ShareChat: GPT Group

By Jenny Ruth

Friday 15th May 2009

Australia-based GPT Group's up to $A1.7 billion ($NZ2.17 billion) capital raising will provide it with a much-needed improvement to its debt headroom, including some relief relative to debt covenants in its joint venture with Babcock & Brown International, says Aegis Equities Research analyst Sam Haddad.

But he remains concerned about risks attached to the joint venture including the fact that the degree of improvement in gearing in the joint venture remains unclear and is subject to expected further writedowns.

The complexity of the joint venture structure, including its lending arrangements which include multiple covenant tests, is another risk.

Haddad is also concerned about GPT's ability to exit the joint venture in a timely manner and about GPT's ability to manage the joint venture in its best interests, give GPT has no direct control.

GPT raised $A1.6 billion in equity last November.

"Ongoing pressure on asset values and an illiquid property market has forced GPT to raise capital through dilutive equity issues on more than one occasion over the last year to reduce gearing," Haddad says.

"However, further asset devaluations may see gearing levels increase again." He also sees uncertainties surrounding GPT's planned asset sales.

Haddad's 12-month target price is 27 Australian cents compared with the capital raising price of 35 cents a share.

BROKER CALL: Aegis Equities Research rates GPT Group (ASX: GPT) as SELL

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