Disconnect between share price and pub portfolio value spurs Redcape to delist from ASX
A disconnect between its share price and the value of pub landlord Redcape Hotel Group’s portfolio sparked the decision to delist from the ASX after four years.
Tension between the share price and independent valuations of suburban pub landlord Redcape Hotel Group’s portfolio sparked the decision for the company to delist from the ASX after four years.
Since the company listed in November 2018, the pub market has been roaring. Multimillion-dollar deals have been made seemingly monthly by key players as many take advantage of the Covid-19 environment. Redcape itself has added four new locations to its Sydney and Brisbane holdings in the past financial year.
But this strong economic environment was not being reflected in Redcape's share price, which ambled around its initial listing price of $1.04 per share for much of its time in the public view. A valuation of assets found a fair price for the portfolio sat at $1.31 per security.
Following the announcement to delist, the share price spiked 18.1 per cent on Wednesday to $1.11.
Redcape chief executive Dan Brady said the decision – announced alongside its half-year results – was not sudden, nor will it impact on the company leadership structure or sustainable growth strategy.
“There’s been a friction point here in terms of how we raise equity,” Mr Brady said.
“We’ve had a lot of terrific support from our lenders, we’ve had support by virtue of outstanding performance for our communities. But to not be able to sensibly raise capital because of an irrational share price has been frustrating, particularly when you’re in other unlisted funds and seeing the demand in the sector.
“There has been a disconnect. This allows now both the organisation to get on with growing, but also gives security holders a terrific outcome either way they choose, it is their choice.”
Shareholders have been given the option to either remain invested in Redcape as an open-ended unlisted fund or realise their investment through an off-market buyback at $1.15 per security, totalling $247m. The buyback price is a 13.9 per cent premium to the three-month volume-weighted average price.
The proposal is set for shareholder approval on September 10.
Underlying earnings for the last financial year rose 51.7 per cent to $56.4m on 2020 financial year figures and 16 per cent on pre Covid-19 levels. This resilience was also seen in strong like-for-like revenue growth from Redcape’s portfolio of community pubs, up 8.4 per cent on the prior year excluding the Covid-impacted months of March to June in each corresponding period.
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