I keep coming back to the lack of scale in RTI. The assets being put up in the float is about $10m and that includes the deposit tied up in RNC. The $2m writeoff they have taken is about 20% of the equity. A fair bit of scale they do have is due to acquisitions in the last few months which they hope to pay out by the current raising. How does such an entity fund a $65m takeover ?
9% yield sounds good but they will have to pay everything out to achieve it. The PDS says they hope to make further acquisitions and these will be funded by further equity issues. Is a high yield as attractive when there is constant equity raising ?
If RNC had got the 10m RTI shares as part of the deal they would have control of RTI in its current form.Maybe the structure has some appeal to RNC as way to acquire RMA's without the amortisation issue.
Looking forward to the June results and hopefully an increased fully franked dividend
RNC Price at posting:
20.5¢ Sentiment: Buy Disclosure: Held
