CNI's listed floating rate bond, C2FHA is currently yielding around 8.3%.

As I touched on before, I find CNI very difficult to value, but I do think the listed bond is undervalued in relation to the equity.

The bond yields about 1% higher than the equity and is reasonably secure - although I'd be interested to hear the thoughts of anyone else who can be bothered sifting through the PDS.

To take the equity over the debt, you'd need to have very strong conviction in CNI's ability to raise FUM.

Despite my past grievances regarding the complexity in CNI's financials, I have formed the view that it would be a prime candidate for some sort of corporate action.

I'm currently focusing attention on 3 fund manager/REITs which I think would achieve good synergies if they were to join forces:

CNI - $1.3B MC

HMC - $1.1B MC

DXS - $8.3B MC

CNI and DXS would be able to merge their Industrial REITs (DXI, CIP) to create a mammoth $8 Bil pureplay industrial REIT with no listed competition. DXS could also sell some assets into CNI's office REIT - COF to free up some capital. They also both have some healthcare and retail asset funds which may be able to be benefit from increased scale. This would transform Dexus into a one stop shop for pretty much any asset class (except listed equities). CNI's FUM breakdown is below:

HMC also has two listed REITs - HDN and HCW which could work quite well if folded into CNI or DXS. I imagine CNI has quite a few retail assets/funds that it could fold into HDN or vice versa. HCW is focused on healthcare and could provide CNI with some opportunities to roll over some of it's unlisted healthcare funds into a listed form or vice - versa.

Watch this space.

HY23 Report out. Looks ok but as I previously posted, there's a bit of complexity to CNI's books which makes me hesitant to assign a value to the business.

Also thought I'd point out this balance sheet page is a little bit deceiving. The intangibles on the balance sheet aren't overly helpful for the purposes of assessing debt levels. Balance Sheet Gearing is more like 30-35%. The financial assets on the balance sheet are also levered themselves (for instance COF and CIP are about 30-35%). So if you did a look through gearing calculation you might get a figure closer to 50%.....

It's possible that CNI's exposure to falling valuations in terms of gearing ratios and interest cover ratio (ICR) is higher than the market realises. That being said, the ICR is still pretty good because of the management fees CNI generates (which are partly attributable to the goodwill on the balance sheet) .

I've been following this in background for a while but find it really hard to forecast cashflows going forward. There are a lot of moving parts and transaction based revenues. Almost every line item has the potential to be volatile, including management fees and distribution income. These are both influenced by higher interest rates, resulting in lower distributions and book values.

The "due diligence to potential returns ratio" is doesn't stack up for me.

CIP, COF and C2FHA are relatively simple and easier to value. For this reason I've focused my attention in this direction.