Daily ShareChat: GPG

By Jenny Ruth

Monday 23rd May 2011 1 Comment

Guinness Peat Group's strategy to release value is positive news for investors with key issues being how long it will take, what tax issues may affect the end value shareholders receive and how pension obligations and other liabilities could affect the company's net asset value (NAV), says Greg Main, an analyst at First NZ Capital.

GPG is proposing to make an initial 80 million British pounds (NZ$163 million) return of capital by cancelling one out of every eight shares and paying 35.07 pence per cancelled share, subject to 75% of shareholders approving.

For most New Zealand-based shareholders, this won't be taxable. "Unfortunately, we do not believe investors should necessarily infer further distributions or returns of capital will be treated the same for tax purposes as this one," Main says.

"The potential tax value leakage remains a key unknown when assessing how much of our assessed NAV per GPG share shareholders could receive," he says.

Main's NAV is $1.20 per share. "To reflect the risk of tax leakage, we have elected to assume that the value leakage to tax will be 30% of GPG's net assets adjusted for its proposed capital repayment, Coats and its UK holdings. This equates to 18 cents per share."

Rating: Neutral (raised from underperform)

Comments from our readers

On 23 May 2011 at 3:25 pm vince petry said:

MANY OF GPG'S LARGER HOLDINGS WOULD COMMAND APREMIUM WHICH IS NOT REFLECTED IN CURRENT VALUES OR TAKEN INTO ACCOUNT BY ANALYSTS---IF A DISCOUNT IS TO BE APPLIED TO CURRENT ASSET VALUES SURELY THE ANALYST CAN EXPLAIN HOW THIS IS ARRIVED AT IN DETAIL .