Duxton Water Limited (ASX: D2O) sees increase in permanent water portfolio leased to farming business

Highlights

• Duxton Water is an ASX-listed company with a diverse portfolio of water assets
• In July, the company agreed to buy high security water entitlements for AUD 39.1 million
• Due to impact of recent flooding, the overall entitlement market dropped by 3% in the June quarter

Duxton Water Limited (ASX:D2O) is an Australian company having a diverse portfolio of water assets.. The company manages a diverse portfolio of water assets located in the Southern Murray Darling Basin region in Australia. The portfolio of water entitlements owned by Duxton Water provides a vast range of water supply solutions to the farming community.

During the June quarter, the company was preparing for the next year by transferring the surplus allocations to preferential zones. This was done in order to optimise the water delivery to customers on forwards, carry-over and leases.

In July, the company shared that it has agreed to acquire AUD 39.1 million of high-security water entitlements, taking the water portfolio to a high of AUD 401 million.

The company said that the allocation trading volume and entitlement were relatively low in the latest quarter. The overall entitlement market decreased by 3% in the June quarter due to recent floods and the release of capital at the seller’s end to assist new season farming plans.

Throughout the quarter, low allocation prices were witnessed by D2O.

Recent business update

In a recent significant update, dated 8 August 2023, the company informed that it has completed the non-renounceable entitlement offer of AUD 44.2 million to fund the above-discussed water entitlements acquisition.

Key positives and negatives

The net margin of D2O increased from 29.2% in FY21 to 50.1% in FY22. Also, the return on equity increased from 5.9% in FY21 to 6.9% in FY22.Meanwhile,  the current ratio dropped from 3.65x in FY21 to 1.66x in FY22, and the debt to equity ratio fell from 0.73x in FY21 to 0.86x in FY22.

Outlook

During the latest quarter, additional leases were finalised by D2O, which started on 1 July 2023. This led to the lease replacement, which was due to expire on 30 June 2023.

In a statement, the company said that it expects annualised leasing revenue of AUD 9 million in FY23 and 24, including treasury wine estates lease.

Share performance of D2O

D2O shares closed 2.52% down at AUD 1.54 apiece on 14 August 2023 with a market capitalisation of AUD 241.34 million. Including today’s share performance, D2O share price surged by 3.69% in the past one week and dropped by 7.69% in the past 12 months.

D2O's 52-week high is AUD 1.802 apiece, recorded on 28 February 2023, and the 52-week low is AUD 1.465 apiece, recorded on 26 July 2023. Worth mentioning here is that the existing share price is only 5.46% far from the 52-week low.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, and currency, is 14 August 2023. The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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