Scant details on Omnia rights offer irks investors, say analysts
The listed chemicals and fertiliser maker says shareholders will decide on the R2bn rights offer on July 25
Chemical group Omnia’s market capitalisation is now equal to the R2bn it hopes to raise in a rights offer because of a sell-off in its shares in the past two weeks. Analysts have blamed the delay in revealing the programme's details for the decline in the share price.
The listed chemicals and fertiliser maker’s shares have slumped 23.29% since June 25, when the group presented its case for the rights issue. Omnia’s shares are trading at R29.45, giving it a market capitalisation of about R2bn.
The company’s shares are down 23.29% since the beginning of 2019, while the all share index and the chemicals index have shed 2.41% and 4.40% respectively in the same period.
Since end of March 2018, Omnia’s market capitalisation has shrunk by more than R8bn.
Small Talk Daily daily analyst Anthony Clark said the delay in announcing key information such as the price and number of shares to be issued caused uncertainty.
Omnia first announced plans to raise additional capital through the rights issue on May 30, after discussion with its lenders to restructure crippling debt.
The proceeds of the rights offer will be used to reduce the company’s debt, which at the end of March was R4.4bn, up from R2.5bn in the prior year after the acquisitions of lubricants supplier Umongo Petroleum and Oro Agri, a producer of agricultural biological products.
“All the market knows is that there is a R2bn rights offer but has no idea at what price and how many shares. The company should tell the market what the price will be. The market is punishing Omnia for that,” Clark said.
Cratos Capital portfolio manager Ron Klipin said the market expected the company to provide further details on the rights offer. “The market is uneasy with the company’s inability to provide details of the pricing of the rights issue, so there is a great deal of uncertainty as to where the price is going to settle,” Klipin said.
He expected Omnia to provide the information when it releases its annual results.
Omnia said the rights issue was part of its plan to reduce the net debt-to- earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio from 3.9 times to 2.4 times.
The net debt-to-Ebitda measures the indebtedness of a company and shows the number of years it would take a company to pay back its debt if net debt and Ebitda were held constant. In the 2018 financial year, the debt-to-Ebitda was 1.7 times.
Between 2013 and 2017, Omnia had little debt.
The company, which made a R407m net loss in the 2019 financial year, funded the recent acquisitions through a combination of borrowings and bank overdraft facilities.
It said on Tuesday that the rights offer was on track.
“The work stream for the proposed R2bn rights offer is on track and progressing as expected. As you would have seen in the SENS of 25 June 2019, Omnia has called a general meeting of its shareholders scheduled for 25 July 2019,” Omnia said.
The company said it expected to get the requisite approvals from shareholders to proceed with the proposed rights offer.
“Omnia is in the process of drafting the relevant documentation, which will have to follow the usual JSE regulatory processes as well as Omnia’s internal approval processes. Once all approvals have been obtained, Omnia will be in a position to launch a rights offer,” the company said.