Comparison to your investments
As can be seen, TIX generates considerably more income in relation to the size of the asset pool it owns. Other factors do impact valuation, such as:
- quality and tenure of tenants
- maintenance requirements and the age of properties
- the location of properties
That said, this comparison clearly implies upside in TIX's property portfolio valuation.
An increase in the value of its property portfolio would translate into higher NTA / security (NTA = net tangible assets), which normally flows though to security price (although the correlation is not always perfect).
Additionally, we have confidence that the manager of TIX is fully aware of the risks of the low interest rate environment.
One of the key points to take from above is that, in a world of significant liquidity (and large pools of investments – like sovereign wealth funds (SWFs), retirement funds etc), larger assets and pools of assets are attracting premium prices.
As a result, we support TIX’s efforts to 'bulk up' through its ongoing takeover offer for ANI - please refer to news regarding this below. Additionally (but importantly), an ANI takeover is modestly profit accretive for TIX.
As a minimum, the combined portfolio size will lead to a higher index weighting, meaning more passive funds will become security holders. It will also potentially lead to a takeover interest from SWF’s, retirement funds, corporate or financial buyers (particularly offshore ones – where debt is cheaper than Australia).
The combined TIX/ANI would have a FY-15 net property income of ~$69.5m. Using the Ascendas transaction metrics, the current combined portfolio valuation would be circa $1.09b (not allowing for differences in property location, tenant quality and tenure etc). This compares to the current combined property portfolio valuation of $874.0m.