Capital's share value appraisal questioned

A hard-hitting report criticising the independent appraisal of the Capital Properties takeover deal was released yesterday, challenging its share valuation range.

Analyst Blair Cooper, of Citigroup Research in Wellington, said he had "serious misgivings" about Deloitte's valuation range for Capital's shares.

AMP Property Portfolio has offered $1.42 for Capital shares but, on Monday, Deloittes said the shares were worth between $1.48 and $1.73.

But Cooper's analysis of the offer said there was a lack of information in the target company statement.

"We were particularly surprised by the absence of any yield analysis in the appraisal report," he wrote in an eight-page analysis.

"Our chief concern is the minimal commentary in relation to earnings and yield over the next few years. In our view, the target company statement places too much focus on the potential upside from developments, without dealing with downside risk due to reduced yield during construction and the impacts of any capital raising.

"Despite our misgivings about the valuation range, we recommend investors continue to hold and await a response to the target statement from AMP."

Citigroup's target price for Capital was $1.42. Kiwi Income Property Trust, with a 19.9 per cent stake in Capital, did not have the capacity to mount a takeover now but AMP might lift its offer.

"We suspect AMP may have some room to lift its bid at the low end of the valuation range, although we are not sure if this will guarantee an unequivocal endorsement by Capital's independent directors.

"Accordingly, there is a chance AMP may not proceed with the takeover or will fail to reach the minimum acceptance level of 50 per cent," Cooper said.