Abacus battles tough year

The Abacus Property Group’s share price may never climb back to the $2 peak it achieved before the global financial crisis.

That is the bottom line assessment of Abacus director, funds management, Tom Hardwick, who fronted advisers at a Financial Services Partners conference as Abacus braced for a possible 20 per cent fall in property value on top of what has already been a tough year.

“It’s been a very unpleasant year for us, we were about $2 at our peak and now we’re 23.5 to 24 cents today,” Hardwick said.

To survive the possible 20 per cent fall in property value, Abacus required between $120 million and $140 million worth of capital to reduce debt, Hardwick said.

This came in the form of a recent $24.4 million private placement to Kirsh Group and a $187 million rights issue that Kirsh Group will sub-underwrite.

The additional capital raised will be used to reduce gearing and allow Abacus to capitalise on acquisition opportunities in the current market environment.

“What this means is that Abacus will be able to stand tall and mop up the crumbs that are going to be left as this section rots over the next year or two, so we’ll be one of the scavengers picking the meat off the carcass.”

With Abacus shares currently at around 25 cents, “we will get back to 50 or 60 cents without too much trouble”, Hardwick said. However, he wasn’t confident that Abacus would reach its previous high.

“We’re not going to get back to $1.90, I don’t think ever, but anything’s possible.”

For existing shareholders who may have “spare cash”, it is a good chance to buy stock at 25 cents and get the average entry price close to the 60 or 70 cents, Hardwick said.

“We will get back to that over the next year or two ... without too much trouble.”

Hardwick said property values will also impact some of the company’s funds, however, its storage fund has been a “great fund”, as the storage sector is resilient in the tough economic environment, he said.

In the US, storage facilities have experienced growth in the last 12 months he said.

“There are some people who use storage as a bit of a luxury, but there are plenty of people who use it as a necessity.”

Hardwick said existing investors in the storage fund have been given the opportunity to reinvest more money in the fund, with remaining stock open to new investors from March.