24-Nov-2020:  Moelis Australia: VITALHARVEST FREEHOLD TRUST (Sell): PWG to support MIRA proposal to acquire VTH for $1/share

Analyst:  Edward Day, +61 2 8288 5424, [email protected]

COMPANY UPDATE

• Ticker Code:  VTH
• Stock Price:  $0.970
• Target Price:  $0.960
• Recommendation:  Sell
• Forecast Capital Return:  (1.0%)
• Forecast Dividend Yield:  3.9%
• Estimated Total Return - 12 Mth Forward:  2.8%

Company market data: 

• Market Cap:  $179.5m
• Free Float (%):  91.4
• Enterprise Value:  $276.9m
• 52 Week Range:  $0.63 - $0.98
• Shares Outstanding:  185.0m
• Avg. Daily Value Traded:  $0.2m

EVENT

Primewest (PWG), as manager of VTH has entered into a facilitation deed with a Macquarie Infrastructure and Real Assets (MIRA) vehicle to support its acquisition of VTH for $1.00 per share by way of a trust scheme. In the absence of a superior proposal, PWG has indicated their intention is to vote their 19.9% stake in favour of the proposal.

The Deed requires at least 50% of VTH unitholders (excluding PWG’s stake) to vote in favour of the trust scheme. In consideration for the management rights, PWG will receive an $8.0m fee and inclusive of a ~$3.8m uplift on its VTH investment, PWG will receive ~$11.8m in total, having paid $10m for the management rights in Jun’20.

Failing approval of the trust scheme, MIRA has put forward a second proposal to acquire the assets from VTH for $300m. This proposal requires a 50% vote and would ultimately likely result in a wind up of the trust.

PWG has pursued growth in the agricultural sector through the acquisition of the management rights of VTH, and a ~19.9% acquired over the last 6 months. One of the key strategies to growing VTH was a potential restructure to remove the variable component, though there was no guarantee to securing this and timing remained uncertain.

IMPACT

We move our target price in line with the bid price less Moelis’ estimated December distributions to reflect investors’ likely total return from now through to completion.

INVESTMENT VIEW

PWG has indicated support for MIRA’s bid given the certainty of cash from the proposal. Given the current share price spread is <2%, we move our rating to Sell.

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