Villa World (ASX:VLW) discusses capital raising and acquisition pipeline


by David Chau

Transcription of Finance News Network Interview with Villa World Limited (ASX:VLW) Managing Director & CEO, Craig Treasure

David Chau: Hello I’m David Chau for the Finance News Network and joining me from residential property developer, Villa World Limited (ASX:VLW) is its Managing Director and CEO, Craig Treasure. Craig, thanks for joining us.

Craig Treasure: Thanks David, it’s good to be here.

David Chau: First question Craig. You recently raised $80 million via a share placement and bond issue. So why now and what’s the purpose of this raising?

Craig Treasure: For Villa World this raising is all about a continuation of our strong growth story. So we’ve been able to raise both the equity and the bond issue, at the same time and the two compliment each other really nicely. From a timing perspective, that’s all about taking advantage of value accretive opportunities that are in the marketplace. And we aim to continue our double-digit growth profile over the coming years.

David Chau: More about the bond issue, where will the bonds rank in the capital structure?

Craig Treasure: The bond issue is a $50 million issue under the Simple Corporate Bond structure and they are unsubordinated, and unsecured debt.

David Chau: Will they be listed and what’s the coupon and term?

Craig Treasure: The bonds will be listed on the ASX. They will be paying an interest rate of 4.75 per cent above the three-month bankbuild rate, which will give investors a likely yield, just over 6.5 per cent. Interest will be paid on the bonds quarterly in arrears and they will be for a five-year term.

David Chau: And Craig who participated?

Craig Treasure: As announced our bookbuild process concluded early, due to strong demand from our institutional investors and our retail broker syndicate, being ANZ Bank, Evans & Partners and Morgans.

David Chau: Now to the share issue, how much did you raise and at what price?

Craig Treasure: We raised $20 million in a placement with our institutional investors. And we also intend to raise a further $10 million, through a share purchase plan with our existing shareholders and that offer opens tomorrow.

David Chau: And the placement closed oversubscribed, so who participated?

Craig Treasure: It closed 2.3 times oversubscribed; it was well supported by our existing institutional shareholders, along with some new institutions that joined our register and clients from Morgan’s.

David Chau: Now on to financials, how will this raising affect your gearing levels and debt profile?

Craig Treasure: Our gearing range is between 15 and 30 per cent and after the completion of these transactions, it will maintain within that range. What this has done for us it has brought diversity to our debt portfolio. And it is now made up of the bond issue, plus our club facility with Westpac Bank (ASX:WBC) and ANZ. And our dates of maturity for our debt now range from 2019 out to 2022.

David Chau: Now that you’ve got additional funding, what’s your forecast for earnings per share growth and return on equity?

Craig Treasure: We’re forecasting double-digit EPS growth from 2017 to 2019. We think 2018 the growth will be reasonably flat, given the additional shares on offer and the time that it takes to deploy the capital that we’ve raised. So the big step up in our business will come in 2019.

David Chau: Last question Craig, how quickly will the funding be deployed?

Craig Treasure: With this transaction we’ve announced acquisition of a site in Brisbane of little over $10 million, for a housing project. But we’ve also increased our range of expenditure for the full year, from $60 million to $80 million range that we had announced, to between $100 million and $120 million range. So the deployment of those funds will really give us that big step change in the business that we’re looking for, in 2019.

David Chau: Craig Treasure thanks for your update.

Craig Treasure: Thanks very much for having us back.