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BT Funds likes GPG under 50 cents; shares up this week

Friday 16th March 2012

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Shares in GPG recovered from bargain basement levels this week, rising from 45 cents to 52 cents as investors reassessed the likely break-up value of the group.

Among signs that GPG has bottomed out was last Friday’s increased holding in GPG by BT Funds Management, which now owns 3.14 percent of the company, triggering disclosure requirements of the London Stock Exchange.

The stock hit an all-time low of 46 cents a share on Monday of last week, having traded as high as 85 cents in the last year, as investors digested unwelcome news about the size of the conglomerate’s various inherited pension scheme liabilities.

Recent calculations by First NZ Capital suggested additional liabilities amounted to around $259 million or 16 cents a share.

However, Paul Harrison at BT Funds Management expressed confidence about the value of key assets such as the Coat’s global threads and yarns business, while any trend towards higher global interest rates would reduce pension liabilities which stretch well into the future.

“It becomes a judgement call about what you think the bits are worth,” he told BusinessDesk. “They have 2 ½-years from here to liquidate the positions and to a certain extent it becomes calls about what the underlying values are.

“We have a view on Coat’s and what it’s worth, and obligations around the pension schemes that the market has become concerned about,” said Harrison. “Those pension scheme liabilities are determined by interest rates. If rates sell off and rise, then those liabilities come down.”

“We’ve certainly taken the opportunity when they were around 45/46 cents.”

BusinessDesk.co.nz

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