Abacus Group is expected to be under the spotlight from investors on Friday when it reports its results, with some questioning whether its storage shed portfolio is now a takeover target after disappointing share price trading of the spun out entity.
The company’s Abacus Storage King real estate investment trust, which comprises a portfolio of 131 properties worth $2.6bn, started trading on August 1 at $1.41 per share, taking its market value to $1.85bn.
But now the shares are at $1.24, and its market value is at $1.53bn, while shares in Abacus have also fallen to $1.095, with its market value at $1bn.
Abacus holds a 19.9 per cent stake in the newly created Abacus Storage King REIT and charges the entity a fee as its external manager.
The group now comprises just its 24 office and retail properties worth $2.4bn, and the demerger was designed to make the storage assets rerate and create additional value to shareholders.
Abacus has had its eye on rival National Storage REIT for years and owns a 7.16 per cent stake in the $2.9bn Australian listed business.
But now some believe that the reverse outcome could unfold, where target National Storage REIT acquires the Abacus storage spin off instead.
Nathan Kirsh’s The Kirsh Group owns 51 per cent of Abacus Group and 39.6 per cent of Abacus Storage King, and there has been suggestions in the market that he would be in favour of a tie-up with National Storage.
Before the Abacus demerger deal, some suggested that given Mr Kirsh’s large holding, the stock may struggle to trade well because it would not be that liquid, meaning it would not be that easy for investors to get their hands on a lot of shares for buying and selling.
Storage assets have been seen as one of the more resilient asset classes in a downturn for the real estate sector, hence the logic to try to separate them to demonstrate their value as a standalone business.
National Storage REIT’s share price has come off the boil since earlier in the year to about $2.16 from around $2.55 earlier, but has been trading strongly overall.
In June, it reaffirmed annual earnings of 11.5c per unit for the 2023 financial year and has secured a $400m syndicated term loan as part of a refinancing.
It has also signalled that it continued to assess new opportunities as its acquisition pipeline remained strong, but whether a deal as large as Abacus Storage King is on its radar is another story.
Equity capital markets deal makers will no doubt be hoping that trading improves for Abacus National Storage King, paving the way for further floats and raisings before Christmas.
Chemical distributor Redox has seen a rebound in its share price to $2.52 since it listed last month, but it still continues to trade below its issue price of $2.55 per share, and like Abacus Storage King, is considered slighty illiquid with a small free float.
The Abacus demerger saw it raise $225m, and this came with the sale of three non-core commercial property assets worth about $97.9m.
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