GPG's interest in AVJ 'not healthy' – analysts

EXCLUSIVE: Guinness Peat Group should tidy up its own affairs before sniping at one of Australia's leading development groups AVJennings, analysts told Australian Property Journal exclusively late last week.

GPG, described in the market as a ‘professional agitator’, has steadily increased its shareholding in AVJ over the past 12 months to just under 12%, but analysts warned shareholders should be wary about the corporate raiders’ intentions.

One leading Sydney analyst told Australian Property Journal on Friday that GPG’s faultering property group Canberra Investment Corporation and mining stock Capral Aluminium Limited have performed poorly since becoming part of GPG’s corporate conglomerate.

“GPG’s usual tactic is to interfere with management in a company once it gets a foothold, however, Canberra Investment’s and Capral Aluminium are examples of what happens to company buoyancy and shareholder wealth in these takeover situations,” he said.

“AVJennings has a lot of upside and has been managed for future acquisitions and growth in the local development industry. GPG can only have a negative impact on the company.

“There is no doubt shareholder wealth can be quickly eroded in these company raids,” he added.

The specialist property stock analyst, who requested to remain unnamed, pointed to Canberra based developer CNB, now controlled by GPG, as an example of what happens when a corporate raider takes control of a company.

CNB has seen its profit drop from a $12 million high in the financial year 2002 to just $1.5 million in the year ended June 30 2007. Its share price since 30 November last year has fallen from $1.82 to just $1.39 at Friday’s close of trade. CNB returned a mere 2 cents per share..

Worse still, say analysts is GPG’s, Capral Aluminium where shareholders have seen the share price since last November decimated. At 30 November 2006, Capral was sitting at $1.05, however, at the close of business on Friday it was just 0.45 cents – a fall of in excess of 60% in three quarters.

The well known Sydney broker added that even Guinness Peat’s share price has underperformed. At 30 November 2006, GPG was trading at $1.91 on Friday it closed at $1.64½.

Most analysts agree that the fall in GPG and its associated companies share prices is no coincidence, but the market’s considered outlook of the Guinness Peat group of companies.

In the same period, AVJ’s share price since 30 November last year has climbed from $1.14 to $1.27 on Friday’s trade.

One prominent Melbourne analyst said that profit wise AVJ has performed solidly returning steady profits despite a particularly tough residential market, especially in Sydney.

“AVJ is poised for the next cycle in residential property market. It is also good to see it is diversifying its business and development interests. Its management is in place to make the most of the next cycle and this diversification.” he added.

“Look, the facts are GPG’s interest in AVJ is not a healthy one. They want to grab the AVJ brand name and the near enough to 9000 lots of land AVJ have built up around Australia,” the analyst pointedly added.

“It’s definitely a case of caveat emptor, or in this case, shareholder beware! GPG will continue its sniping, but at the end of the day they won’t win out this time because AVJ is a very solid outfit.”

Fortunately for local shareholders, AVJ is also solidly held in Singapore with almost 60% of the company controlled by chairman Simon Cheong and rumour has it he is holding onto his interest in AVJ for the long term.

Australian Property Journal