Duxton Water Ltd (ASX: D2O) is raising another $15 million from institutional investors to take advantage of more growth opportunities.
The water entitlement business has also outlined it will undertake a share purchase plan (SPP) for all eligible shareholders.
The $15 million from professional investors is being raised at a share price of $1.48 per new share. The allotment of those shares is expected on 29 April 2019, pending the final settlement of funds by 26 April 2019.
Individual retail shareholders will also be able to participate in the capital raising at a share price of $1.48 per share. Shareholders can apply for up to $15,000 of additional shares.
The funds raised will be used to finalise already-contracted water assets in the pipeline, to acquire further Australian water entitlements and to cover costs associated with the offer. Excess funds will be used to pay down debt, approximately $60 million fully drawn, and general working capital requirements.
Duxton Water said that there has been a continued shift in demand from irrigators to longer-term water supply solutions and risk management tools like the allocation of forward contracts and leases.
The Chairman of Duxton Water, Ed Peter, said "We believe that greater size and scale of the company and the underlying portfolio will enable the Company to meet the increasing customer demand for further water supply offerings to our irrigator customers.
"With the emerging demand yet to really be factored into the value of water entitlements, we think there is still further capital and yield growth opportunity for us."
Foolish takeaway
The company is clearly very optimistic about the future value of water entitlements, hopefully these raisings are not being done at the wrong time. A $1.48 share price is a slight discount to the current share price and matches the latest net asset value per share of $1.48 at the end of March. The slight discount to the share price is welcome, but not enough for me to participate.
At a share price of $1.48 the company offers a fairly attractive grossed-up dividend yield of almost 5%, which is pretty good considering the dividend is steadily growing.
