I suppose they need some money to fund their next dividend :p;
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Bit strange raising funds from shareholders without really hinting at what purpose it is planned to go to. Could be a black hole developing.
Net debt is what is pertinent - THL had $225m of net debts as at 31 December 2018.
Probably has increased higher since then as $12.5m of dividends were paid and THL (as W69 pointed out) has been using debts to pay dividends.
So the $90m raised is clearly to appease the banks.
Lets hope they retire debt. Why didnt they make that plain. Doing an Israel. Funds can go to anything they desire.
In the main announcement they did say what new capital was ...and expanded on this in presentation
Extract-
The equity capital raising will:
Create additional balance sheet headroom and provide thl with financial flexibility to undertake smaller bolton acquisitions without the need to raise additional equity capital, allowing it to more quickly respond to opportunistic situations as they arise;
Fund near term investment in travel technology opportunities through TH2; and
Reduce debt levels and leverage, which thl considers to be prudent at this time given headwinds in some markets (e.g. USA).
And thl going to help their CTIC get into RVs and take China by storm
They should be suspending dividends
This seems well structured capital raising.
The ratio of 1:9 is fairly small so it shouldn't massively impact the share price. The 2 July record date gives shareholders an opportunity to adjust their holding pre ex date (if they wish to). 37.5% of the money had been raised at no discount to the previous close. There's a shortfall book build so that shareholders not taking up rights have a good chance of receiving some value from the rights. Retail and institution shareholders are treated equally. All shareholders that take up their full entitlement have access to participate in the shortfall book-build. While the discount to the theoretical ex price is quite large, this should have kept the underwriting fee smaller.
If part of the recent declines in share price were from the market being nervious about debt levels, this capital raise will help mitigate these concerns (unless all the money raised is spent on acquisions).
Disc - hold
This announcement also provides a minor update on TH2's likely value, in that its expected to break-even by 2022.
If this is realistic and achieved, it means the expensed contribution only exists for a few years and THL's share of these losses is easily financed by the additional cash raised.
Having turned around the expected 2020 pre-tax expense from start-up losses of US$17m (THL's share is $8.5m), its got to have either pruned the on-going cash burn or developed a fairly useful level of ongoing revenue.
The next wild-card is how much of the potential target market is necessary to get to break-even. If its quite a bit, then TH2 isn't really that valuable. If its only a small portion, continuing to capture more of the potential market will add revenue, few expenses and a lot of gross margin. In this scenario, the valuation of TH2 could be a lot, but more details are needed to quantify this.
THL's share price would then become Existing business * sensible PE + Half TH2. That half of TH2 addition could make the current share price look very cheap.
As reported in the NBR this is for CITIC (CHINA) to help with tourism flow. I also read about selling RV's to China. Keen on the inbound stuff (China tourists) but selling RV's in China?? I dont think they will be as dumb as Fonterra there (hopefully).
What makes you hope that? China is a country where markets are relying on long term personal relationships of people bedded into the local culture who know each other well enough so that they know whom to trust and whom not. It is as well a market with plenty of high stakes corruption - forget to bribe one person and you never get the licence you need to run your business. Bribe the wrong person and you end up worst case as organ donor on death row. Most likely however they just would take your money - as they did with Fonterra (though a number of people got jailed and executed in this scandal and the whistleblower died under unclear circumstances - i.e. doing the "right thing" might kill you as well). Any company would need to invest at least a decade to untangle the net and be able to start playing it.
Why would we think THL has what it takes to play on this playing field instead of just being played?