The initiation of coverage is probably more meaningful than the information contained in the research itself. It’s a beginning of a process that will open GGP to a completely new clientele and that will make GGP a “must” not only among mutual funds REITs but also among major REIT indexes.
The target price assigned by Credit Suisse is $16.50, a cautious estimate; however the timeframe for price appreciation is not disclosed. I hate sell-side research; it’s so vague and so long at the same time. That’s why my blog is called the way it is called.
However, there is some important information on the report, some regarding “Spinco” assets and its valuation, which I think it is worth a look:
- Several catalysts are mentioned for the price to reach $16.50; however I believe that it’s just a matter of when, rather than how, the company will reach its fair value value, which should be around $25, excluding Spinco, by the of 2011.
- After the recapitalization, GGP will remain a fairly leveraged company, with a LTD/EBITDA of 8.2x by the end of 2012, a multiple that should be below 7x. Post bankruptcy, additional deleveraging will have to occur, which can be a catalyst for equity appreciation over the long-term but it will depress the dividend yield.
- An interesting breakdown of “Spinco” assets and a highly subjective $4 price for “Spinco”.
Enjoy the reading!