On 18th April 2019, Duxton Water Limited (ASX: D2O) announced that it has successfully completed the placement, which saw strong demand from both institutions and professional, sophisticated investors. The company will undertake a subsequent Share Purchase Plan (“SPP”) to be offered to all eligible shareholders. Bell Potter Securities Limited (“Bell Potter”) acted as Lead Manager to the placement. The company has received firm commitments to raise $15 million through the share placement (“Placement”) pursuant to Section 708 of the Corporations Act (Cth) at an issue price of $1.48 per new share. The allotment of new shares is scheduled for Monday, 29 April 2019, pending final settlement of funds by Friday, 26 April 2019. To enable all shareholders to participate, the company will also implement a Share Purchase Plan, also at A$1.48 per share, to eligible D2O shareholders. The company will accept subscriptions of up to $15,000 from each shareholder under the SPP.
The funds raised will be used by Duxton Water to finalise already contracted assets in the pipeline, continue to acquire water entitlements in the Australian water market and cover costs associated with the entitlement offer. Excess funds, if any, will be used to repay the debt (~$60 million fully drawn) and general working capital requirements. The company observes a continued shift in demand from irrigators towards longer term water supply solutions and risk management tools, like allocation forward contracts and leases. These funds allow the company to continue to build the diverse water entitlement portfolio in a targeted way, to continue to meet this demand from its irrigation partners.
The placement raised A$15 million through the issue of 10,135,136 fully paid ordinary shares at $1.48 per share and was made to sophisticated investors eligible under section 708 of the Corporations Act (Cth). The issue price of $1.48 represents a 7.5% discount to the last traded price of $1.60 and a 7.1% discount to 10-day VWAP (A$1.593) up to and including the day before the issue price was determined (17 April 2019), and an 8.6% discount to NAV excluding provisions for unrealised gain (A$1.62 at 31 March 2019). The placement shares will be issued in accordance with the company’s available placement capacity under ASX Listing Rule 7.1. The new shares will rank equally with existing D2O ordinary shares quoted on the ASX.
The SPP will provide eligible shareholders with registered addresses in Australia or New Zealand with the opportunity to subscribe for up to $15,000 each in the company at $1.48 per share, the same as the placement. The books closing date for the SPP was close of business 17 April 2019. The SPP booklet is scheduled to be sent to shareholders on Monday, 29 April 2019. The director’s proposed to participate to the maximum extending permissible under the SPP, subject to any legal or regulatory requirements (including superannuation legislation and policy).
The company’s Chairman, Ed Peter, stated that they believe the greater size and scale of the company and the underlying portfolio will enable them to meet the increasing customer demand for further water supply offerings to their irrigator customers. The increased scale will have a positive impact on their existing shareholders as it should create a more diverse register, greater liquidity and with a larger portfolio of assets, greater return capability. The group wants to make sure that all of the existing shareholders are also looked after when they do a capital raise. D20 want their shareholders to be able to participate, to grow their holding, or to at least maintain their position. Mr. Peter further stated that the company is very scalable, and with the emerging demand yet to really be factored into the value of the water entitlements, management thinks that there is still further capital and yield growth opportunity for them.
At the time of writing (on 18th April 2019, AEST: 03:36 PM), the stock of Duxton Water was trading at $1.580, down 1.25% with a market capitalisation of ~$173.89 million. Its current PE multiple is at 18.82x, and its last EPS was noted at $0.085. Today, it touched day’s high at $1.58 and day’s low at $1.56, with a daily volume of 134,075. Its 52 weeks high was at $1.67 and 52 weeks low at $1.062, with an average volume of 98,473. Its absolute return for one year, six months and three months are 47.27%, 19.11%, and 13.88%, respectively.
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