The Duxton Water announcement was lacking in detail to enable a quick analysis of the impact on the sale on NTA although the bullet point summary did state:
The sale was at an average price of $3.962 million per GL verses an average portfolio value of $4.295 million per GL based on the January 2025 report. Based on the disclosed mix of the 30.614 million GL sold, 47.3% were general security permanent water entitlements whereas based on the disclosure at the time of the July 2023 capital raising, general security permanent water entitlements (excluding the TWE portfolio acquired and resold) comprised only 21% of the entire Duxton Water portfolio. Presumably general security permanent water entitlements are worth less than high security permanent water entitlements.
My assumption based on the above is that the Government sale will have a small positive immediate impact on NTA but the bigger prize is summarised by the following statement:
In other words, it presents an opportunity to replace the sold entitlements with better entitlements which will enhance Duxton Water's financial performance going forward. The short term reduction in debt while this transition occurs is worthy of a market rerate as it significantly de-risk's Duxton Water, however if they rebuild the balance sheet with increased borrowings this risk will re-emerge. As noted, it will presumably also replenish the franking account balance to support future dividends.
It would be good to see Duxton Water release an investor presentation that details more fully the immediate impact and their strategy going forward.
Rexrex, a comment on your hypothetical calculations - as the published NTA at January 2025 was net of debt of approximately 74 cents of debt per share, if you did have a 15% increase in the gross value of entitlement's, this would have a magnified impact on NTA. For example, if January NTA was assets of $2.40 per share less $0.74 cent debt to give NTA of $1.66, then a 15% increase in entitlement value would produce a NTA of $2.02 (i.e. $2.40 plus 15% gives $2.76 less debt of $0.74). For the reasons set out above, I'm assuming the immediate NTA impact is only a small positive amount.
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