Redcape Hotel Group

Redcape Hotel Group (Proposed ASX Code: RDC) formerly known as Hedley Leisure & Gaming Property Partners Ltd, is an Australia-based hotel business, operates a diverse portfolio of hotels and provides liquor and gaming services. The headquarter of the company is situated in Sydney, New South Wales, Australia and it is being currently headed by Mr. Dan Brady – the Chief Executive Officer (CEO). Currently, the company operates 32 hotels in NSW and QLD, owning the freehold titles to 31 and one leasehold of those venues. In addition, the company operates as a freehold going concern which means Redcape owns the land, building, works-in-progress and operational entitlements of each hotel. As per the management, freehold ownership improves the company’s ability to invest in refurbishment opportunities and provides the potentiality to generate future value from the real estate on which the hotels are situated.

The Company intends to list on the ASX and continue to fund Redcape’s future operations and new growth projects through cash flow generated by operations and through the use of new debt and equity capital. For that matter, the company issued the Product Disclosure Statement (PDS) on 1 November 2018 with the Australian Securities and Investments Commission (ASIC), in relation to an offer of 551.5 million Shares at an issue price of $1.13 per Share to raise capital in the range of $50 Mn to $60 Mn. The offer was opened on 12 November 2018, and it is expected to close on 22 November 2018. The shares are expected to commence trading on the ASX on 4 December 2018. The objective of IPO is to continue pursuing other acquisitions that have a strategic fit for the Company; provide additional flexibility with respect to the funding of growth initiatives; diversify Redcape’s register through the introduction of new retail and institutional investors; and provide Moelis Australia Securityholders an opportunity to partially realize their investment in Redcape.


Key Offer statistics (Source: Company Reports)

On the other hand, the company has decided to proceed a repurchase the market, before the opening of the book, in an effort to calm potential investor nerves and encourage book-side deals.The reason for the repurchase is to provide the liquidity support to Existing Securityholders who may wish to exit their investment in Redcape, following listing. Under the Buyback event, Redcape may acquire up to 25.8 million Stapled Securities which is equivalent to 5% of the Redcape’s Stapled Securities on an issue before the Offer at a price up to $1.13 per Stapled Security. The Group will go for Buyback event if the trading price of Stapled Securities on ASX will be $1.13 or less, and the company will have the ability to fund the Buyback from its cash flow. There is no assurance given by the company that the Buyback will proceed. Additionally, for FY19, the company expects operating EBITDA to be $68.8 Mn which would result in a growth of 24.3% on Y-o-Y basis. This guidance is heavily based on FY19 acquisitions that include The Sun, Vauxhall Inn and Australian Hotel and Brewery settled in early FY19 and the Acquisition Portfolio which exchanged in October 2018 and is expected to settle on or shortly before 18 December 2018. This IPO is worth a watch as the group aims to use the entire proceeds for growth through IPO funding.  
 

 
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