Real Estate magnate, Mirvac Group bags A$750 million on the successful completion of institutional placement, directed to fund the company’s next generation projects.
In the announcement dated 30 May 2019, Mirvac Group (ASX: MGR) announced that the company has received an overwhelming support of both existing and new investors to its institutional placement, which led to the raising of A$750 million through the issue of ~252.5 million securities at the placement price of $2.97 per new security.
The rationale of equity raising is to support the company in delivery of the next generation of value accretive commercial, industrial, residential and mixed-use projects, repay debt and replenish funding for its existing development pipeline.
Equity raising to position Mirvac for future growth (Source: Company’s Presentation)
The placement comes at the backdrop of remarkably strong performance of the company in Fiscal 2019 to date. In the highly supportive business environment, the company has upgraded its expectation for FY19 earnings per stapled security (EPS) to 17.1 cents per stapled security, which represents an upper end of its previous guidance range of 16.9 to 17.1 cpss and an 4% increase on FY2018’s earnings. Distribution per stapled security (DPS) was reaffirmed to 11.6 cpss, representing DPS growth of 5% on FY18.
Company’s DPS performance (Source: Company’s Presentation)
Mirvac’s CEO & Managing Director, Susan Lloyd-Hurwitz stated that the company is delighted to see the strong support of its investors and it look forward to continuing to deliver long-term value for our securityholders through our award-winning asset creation capability.
Talking about the company’s progress in its future development plan, Ms Lloyd-Hurwitz stated: Mirvac continues to deliver on its active and committed development pipeline worth $3.1 billion that is fully funded. It, therefore, intends to utilise this fresh equity to repay debts and to ensure the funding for the activation of company’s future plan and commercial development pipeline that has an estimated end value of more than $4 billion.
Mirvac’s $3.1 billion active Office development pipeline significantly de-risked through 90% tenant pre- commitments. (Source: Company’s Presentation)
Let’s skim through the company’s preliminary Fiscal 2020 guidance:
- FY20 DPS is expected to grow by 5% compared to FY19, on the back of passive earnings that are estimated to grow by at least 5% per annum on average over FY19-21.
- The assumed divestment of the non-core Tucker Box assets as well as the impact of placement is expected to take a shape of 2% growth in company’s FY20 EPS in comparison to FY19, which is expected to be 17.1 cents per stapled security, as per the company’s latest guidance update.
- The payout ratio for FY20 is projected to remain at a sustainable level of ~70% of operating earnings, supported by the increased contribution from passive earnings.
Mirvac’s Future Plans:
First, the company intends to issue the new shares in the settlement of the above-mentioned placement on 3 June 2019, with allotment and normal trading scheduled to occur on 4 June 2019.
In addition, the company plans to undertake a non-underwritten security purchase plan to provide eligible shareholders with the opportunity to acquire up to $15,000 of stapled securities at $2.90 per stapled security (being the Placement Price, adjusted for the June 2019 distribution of 6.3cpss).
As the trading halt got lifted from MGR securities today, the stock price dropped 2.581% in a mid-day trade to stand at $3.020 as at 30 May 2019 (1:24 PM AEST). The drift seems to represent the existing shareholders response to placement which may result into a short-mid term loss from the subsequent dilution of their current holdings.
Over the past 12 months, MGR has delivered a decent return of 33.05%, including an upside of 20.62% recorded in the short term of past three months.
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