Villa World equity raising as earnings forecasts are upgraded

Leading Queensland residential developer Villa World Limited has raised more than $30 million in equity in order to further grow its development pipeline during 2015 to build future earnings and capitalise on positive market conditions.

The equity raising comprises a fully underwritten placement to institutional and sophisticated investors which raised $26.7 million and was five times oversubscribed.

Villa World has subsequently announced non‐underwritten Share Purchase Plan to eligible shareholders targeting to raise a further $5 million.

It is the second successful equity raising since Craig Treasure took over as managing director in 2012.

Villa World raised $27.2 million at $1.60 in September 2013 and since then, the company’s shares have traded between $1.68 and $2.29, and last closed at $2.11 pre placement.

Mr Treasure said the response to the placement was positive and reflected investors’ confidence in Villa World’s growth strategy.

“We are very pleased with the strong demand for the placement from our existing and new institutional investors,” Mr Treasure said.

“The placement was heavily over‐subscribed and we are expecting strong demand from retail investors under the Share Purchase Plan,” he said.

The announcement comes off the back of strong sales across the company’s projects and increased profit guidance for the 2015 financial year.

Lakes Quarter 1267_RT Park Vista Streetscape

Above: Villa World’s Park Vista community, where the company recorded $62 million in sales last year

After initially providing guidance of $23.7 million net profit before tax in August 2014, strong market conditions, sales momentum at newly released projects and increased certainty around delivery has seen Villa World upgrade guidance to $27 million in December, and again yesterday to $28.5 million.

It follows Villa World’s (unaudited) before profit tax of $11.1 million for the first half of FY15, at the top end of the guidance provided by the company in December last year.

Placement and SPP shares will rank equally for the interim dividend, which is expected to be 6 cents per share fully franked. Villa World reaffirmed its dividend policy of paying out 50 per cent to 75 per cent of net profit after tax semi‐annually.

In FY14, Villa World paid fully franked dividends of 15 cents per share, representing an attractive dividend yield of 7.9 per cent at the raising price.

Mr Treasure said the capital raising was part of Villa World’s measured ongoing growth strategy.

“We are increasing our capital base to provide us with the financial capacity to take advantage of acquisition opportunities at prudent gearing levels,” Mr Treasure said.

“Our growth trajectory is based on positive underlying fundamentals in Villa World’s key markets of South East Queensland and Melbourne.

“Our growing development pipeline supports our increased sales targets of 1000 to 1200 lots in FY16, and we continue to experience positive earnings growth momentum.”

Villa World recorded 352 sales in the first half of the financial year and reports its sales rate has risen to 72.7 homes per month in the second quarter of the financial year.

Villa World has also increased its inventory levels and has been actively restocking with the announcement of $103 million in new acquisitions so far in FY15.

Villa World’s development pipeline has doubled since FY13 to 5,354 lots, and represents four to six years of sales at its 1,000 to 1,200 lot p.a. sales target.

Established in 1986, Villa World is Queensland’s longest‐established ASX‐listed housing developer and one of Australia’s largest integrated housing providers.