Austock supports Great Southern restructure
Austock Securities has backed Great Southern’s restructuring proposal in its initial review of the listed agribusiness company.
The broker’s report said the offer to buy out some of the managed investment scheme’s (MIS’s) timber and cattle owner interests made sense.
“The proposal makes strategic sense,” the Austock report said.
“We believe project investors are being offered fair value for their interests and it makes sense for investors to accept stock.”
Investors are being offered Great Southern shares for their interest in the schemes.
Austock sees the move as creating more wealth for the agribusiness company.
“Great Southern is more valuable should the scheme [proceed] because the combination of the land assets and the plantations will create a sustainable forestry business with vast land holdings,” it said.
“It also creates a cattle enterprise which can be run or sold to reduce gearing.”
Great Southern is making the offer on eight of its MIS projects, however, if the deal goes ahead, there will be 26 remaining timber and horticulture schemes.
The proposal needs approval from MIS owners and shareholders in Great Southern, as more than 800 million shares will be issued.
Austock believes the share price will reach 73 cents in 12 months if the proposal goes ahead. Currently, Great Southern’s share price is languishing at 36 cents.
“Great Southern will have sustainable cash flows from harvesting of plantations and upside from new MIS sales,” Austock said.
“We forecast free cash flow averaging $44 million per annum during the next five years and gearing of about 60 per cent.”
If the proposal is rejected, Austock believes the agribusiness manager will be forced to sell assets to maintain cash flow.
The meeting for MIS investors is on December 1 and on December 4 for Great Southern shareholders.
Both meetings need 75 per cent of shareholders to cast a vote and more than 50 per cent to approve the proposal.
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