MacarthurCook Property Securities Fund (ASX: MPS, SGX: AOP)

This is follow up to the first post on MPS (click here for the article). I keep wondering what I have missed - the stock has been trading at close to half NTA with the chance of a big windfall (from the legal case) on top of that.

Here is some more information: 

AIMS (http://www.aims.com.au)

This is the group that took over MacarthurCook Ltd. AIMS appears to have more of a background in lending and securitisation rather than funds management. The MacarthurCook deal brought them in ~$1bn FUM. Current FUM managed by AIMS is ~$1.5bn. Another of the funds is listed on the Singapore Exchange: AIMS AMP Capital Industrial REIT. As the name suggests, the fund is jointly managed by AMP: which is about as blue-chip a company you can find in Australia. The AIMS AMP fund trades at a premium to NTA.

AIMS is not listed so I don't have their financials. Clearly there is a Chinese connection, but this appears to be an attempt at building connections into the Chinese investment market. Maybe MPS will be used as a vehicle to launch into more exotic investments; as was threatened with RCU.

Property Portfolio 

Perhaps the actual property portfolio is a steaming pile of crap, and as noted the valuation will continue to deteriorate. As at 31 December the total gross assets were $54.3m with the listed property valued at $3.7m and the unlisted portfolio at $48.4m. Cash and other bits and pieces made up the rest. The 31 December accounts note that NTA prices were not available for $20.7m of the $48.4m in unlisted assets. Instead, most recent NTA's were used:

I've scouted websites for these funds and found the following NTA's:

Stockland Direct Property Trust No. 3 $0.63
Arena Childcare Property Fund $1.0189
Arena Office fund $0.5371

Unless there is a risk of substantial shank in the other investments, I can't see major issues here.

Shown below is the June 30 breakdown of investments:

The APN Champion Retail Fund was since written down to zero, however this was already reflected in the 31 December NTA. Doing a quick reconciliation of the NTA's of the major investments between 30 June and 31 December doesn't reveal anything cataclysmic. Except perhaps for the PFA Diversified Property Trust, where the price has softly down-trending.

There is always the chance a capital raising could be undertaken: this can be a great way to kill value in the short term. But I don't see it happening given debt is almost paid off. Unless of course the intention is to load up and buy more property. Even that may not stop the price creeping up to get closer to NTA. Still, stranger things have happened.

The stock has already doubled since June last year, so perhaps this price level is just a pause on the uptrend.

I just can't find the smoking gun.

Kristian

Disclosure: own MPS