Asset sales boost FKP

FKP’s share price has jumped 47% since FKP: Result 2013 from 22 Aug 13 (Speculative Buy – $1.38) as assets sales give creditability to its simplification strategy.

Since the full year results – in which it outlined $200m of assets under exclusive due diligence – FKP has finalised the sale of 399 Lonsdale St Melbourne for $32m, the $28m sale of half The Milton apartment development in Brisbane and the $18m sale of an undeveloped section of its master planned Point Cook, Victoria project. The sales were above book value and we’d expect more by year end. Proceeds are being used to reduce debt, which at 30 June stood at $655m.

Elsewhere RVG, in which FKP owns 22.6%, has announced it will sell its 37.7% stake in NZ-listed Metlifecare, for NZ$280m ($243m). This will be used to pay off RVG’s $186m of debt leaving RVG debt free. It’s a sensible move and one that means FKP’s share of the equity is most likely worth more than $50m we originally suggested and closer to the $86.3m on the books (see Unlocking the value in FKP from 26 Feb 13 (Speculative Buy – $1.60)).

These sales are welcome and highlight FKP’s progress in reducing debt and realising the value of its underlying assets. The market is starting to catch on and, with the share price now well beyond our recommendation limit, we’re downgrading a notch to HOLD.