Omnia | Making progress
Omnia has entered an underwriting agreement with various institutional asset managers to raise ZAR 2bn at a rights offer price of ZAR 20ps. Omnia will offer existing shareholders c.1.47 shares for each existing Omnia share that the shareholders own. The new underwriting agreement allowed Omnia to end its standby underwriting agreement with four South African banks, which should be positive for Omnia from a cost viewpoint. Omnia is obtaining the prescribed regulatory approvals for its rights offer circular. The Group expects to publish the circular at the end of Aug ‘19. In our view, the assistance from shareholders is encouraging and a vote of confidence in the underlying Omnia business.We estimate that the counter is trading at a 14.2x rolled forward PE (1.16x PE relative). Our average DCF and EV/EBITDA valuation methodology delivers a one-year target price of ZAR 28.66ps post rights issue, implying a total return of 11%. The total return is 3.7% less than our estimated market return of 14.7%. Accordingly, we downgrade to a MARKET PERFORM rating.
Omnia Holdings engaged in the business of services and solutions for the agricultural, mining and chemicals industries. Co.'s segments include: Agriculture, which comprises Omnia Fertilizer and Omnia Specialties, produces and trades in granular, liquid and specialty fertilizers for a range customer base of farmers, co-operatives and wholesalers; Mining, which comprises BME, a manufacturer and supplier in southern and West Africa of explosives, related accessories and blasting services to the mining, quarrying and construction industries; and Chemicals which comprises Protea Chemicals, a manufacturer and distributor of specialty, functional and effect chemicals and polymers.
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