Ann: Capitol Acquires Radiology Network in Melbourne, page-18

We are really held back by the impact of previous management. This is an article on investment in 2019 in the AFR today. Same issue applies to CAJ, all of that dilution about 18 months ago.

 

“Dilution 

The second source of permanent capital-loss risk comes from an overly geared capital structure leading to extensive equity dilution. Mirvac before the global financial crisis is a good example. In 2017-18, Mirvac made operating earnings of $807 million, which was a good 60 per cent higher than the $491 million earned in 2006-07. Despite this large increase in earnings, Mirvacs price today is about $2.30, which is less than half the $5 to $6 share price range seen during 2007.

The key reason for this divergence between earnings and share price is the more than tripling of shares on issue, from 1.2 billion shares in 2007 to 3.7 billion shares today. Too much debt in the lead-up to the GFC meant shareholders were not able to ride out the cycle and benefit from the eventual recovery in earnings.”