Duxton Water has fully committed the capital it raised in last year’s IPO. The company invests in water entitlements in southeast Australia. At 31 March it had invested $63 million or 94 per cent of its portfolio. It has entered into contracts, agreed terms for contracts, or has offers pending for another $4.4 million of water entitlements. When complete, these will make its portfolio fully invested.
Duxton makes money by leasing water entitlements for the main river systems in the Murray Darling Basin. Leasing increases the efficient use of water and aids the transition to the farming of higher value produce.
The majority of its entitlements have been leased for between 3 to 10 years, and the rest can be sold on the spot market. The weighted average yield for long-term leases is 6 per cent. The combined annualized year to date yield for temporary sales plus leases is 4.84 per cent.
The company said it anticipates paying its first dividend in August.
Once fully invested, the company is unlikely to make new acquisitions and should settle down to enjoy fairly predictable revenues based on the terms of its contracts. It could raise new capital from outstanding options, but these are exerciseable at $1.10 so the share price would need to move a little higher. Its recent share price has varied between $1.02 and $1.08. Net asset value at 31 March was $1.08 per share.
Duxton makes more money in dry conditions. Heavy recent rains mean the main storages in the key Murray Darling Basin are 33 per cent higher than in March 2016. However, the company said the latest Bureau of Meteorology outlooks for the Murray Darling Basin suggest hot and dry conditions over the next three months.
Investors interested in Duxton Water may also wish to have a look at H2OX. This is a 24/7 electronic trading platform for water entitlements and allocations for farmers, brokers, clients and other market participants. It also has news on water, entitlements, climate, relevant agriculture and industry issues. (ASX: D20)