Daily ShareChat: National Property Trust

Thursday 1st July 2010

National Property Trust is small and it doesn't have the most attractive set of assets but the proposal to internalise the management contract means "we may see a listed vehicle whose interests will be 100% alligned with unitholders," says Jason Lindsay, an analyst at First NZ Capital.

"In addition to the alignment of interests, positives include a likely materially lower cost structure (no internal acquisition/disposal/leasing fees and no performance fee based on growth in asset value)," Lindsay says.

However, hiring in expertise around legal, bank relationships, accounting and tax may cost more than expected and there is a possibility costs may blow out - under the current management contract, fees are capped. Still, he estimates costs will fall by $550,000 a year.

The proposal includes the manager and associates selling back 32 million units at 51 cents each in December this year. Lindsay says that means the market capitalisation will become smaller and less relevant, although this may be partly offset by the market re-rating the stock.

With a wide open share register, the trust may become a takeover target although Lindsay says he thinks this is unlikely, although it may play a part in sector consolidation.

The internalisation of the management adds 5% to his valuation which he has raised from 51 cents to 55 cents.

Recommendation: Neutral.

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