Question 1: Following Boral recent update, the stock has tumbled a further 7%. Being a long term holder of the stock, I’m not sure if we should cut and run or hold on for the long haul?

Answer: Boral (BLD) has had a poor run – the latest “financial irregularities” in its North American business raising distinct issues around management credibility. I would be inclined to cut as I don’t think the market will re-rate in the short term  – but I don’t know what the break-up value is. At some point, Boral must also itself become a takeover target. As for the brokers, consensus target price is $4.59 – range of estimates from a low of $4.25 to a high of $4.90.

Question 2: Have you formed a view yet on participation in the Centuria Metropolitan REIT (CMA) to retail investors?

Answer: The institutional placement for CMA was well supported at $2.95. The price of CMA has since dropped back a touch following a small uptick in bond yields and weakness in “bond proxy stocks” like REITs.

With the SPP:

• Capped at $10m
• Amounts from $3,000 to $30,000 (subject to scaleback)
• Closes 14 Jan 2020
• Fixed price of $2.9555

I will probably invest as I like CMA, the acquisition looks reasonable and I think interest rates are staying low. But I won’t make that call until closer to the closing date.

Question 3: What are the tax arrangements for the demerger of Coles from Wesfarmers. For capital gains tax purposes, what is the cost base of the Coles shares I received?

Answer: You apportion the cost base of your old Wesfarmers shares as follows: Coles: 28.91%; New Wesfarmers: 71.09%. For example, if the cost base for your old Wesfarmers shares was $40, the cost base for the demerged Coles shares would be $11.564 and for the remaining Wesfarmers shares would reduce to $28.436.

Question 4: I’ve got shares in VAP, which is an ETF – Vanguard Property Securities. I’m comfortable holding them but I’m really interested to understand why they seem so volatile. Any thoughts on this?

Answer: I guess volatility is relative because VAP (the Vanguard Property Securities Exchange Traded Fund) has largely traded in the range of $90 to $95 over the last six months.

Property securities (also called REITS or real estate investment trusts) are seen as “bond proxies”, so when government bond rates move, property securities rise or fall in value. At the moment, bond yields are tending higher, so property securities are relatively less attractive and the price falls. As VAP just tracks what is happening with the underlying property securities, its price also falls.