Daily ShareChat: GPG

By Jenny Ruth

Sunday 27th June 2010

Guinness Peat Group's proposed restructuring plan, which would see the Australian assets spun out into a new company, will not "return value" to shareholders in the sense of a cheque in the mail, says ASB Securities analyst Florian Burch.

"Instead, shareholders will continue to own the same assets which will be administered by more or less the same managers but in separate structures, each with its own set of overhead costs (board, administration etc)," Burch says.

While this may make the businesses more transparent and improved governance, both could be achieved under the existing structure, he says.

If the restructure proceeds, the shares are likely to trade at an even deeper discount to net asset value (NAV).

"We accept the current market conditions and the state of many of GPG's assets do not appear ideal for selling assets, especially under-performing ones bought for a higher price than the market is currently prepared to pay," Burch says.

"Given the 52% discount (with the shares trading at 64 cents) of GPG's shares to our estimate of their NAV, however, shareholders might be better off if the company sold what assets it could - including Coats and the listed Australian shares - and either bought back GPG shares, paid out the cash or set out a method and timetable for doing so."

Investment rating: Outperform.

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