Shares in Tandou (TAN) suffered their worst fall in over 2½ years as the agri-business jumped on a chance to do a capital raising following the recent strong rally in its share price.
The cotton grower and water entitlement trader is looking to sell nearly 54 million new shares to raise around $25.2 million for debt repayment that is linked to recent acquisitions of 34,585 mega litres of water rights and farm land.
The stock tumbled 6.7% to 48.5 cents, which is still above the three-for-eight new share entitlement price of 47 cents. The offer price is 10.5% above Tandou’s last closing price.
Tandou has been on tear over the last several months with the stock hitting 53.5 cents a week ago – its highest level since April 2011.
The company reported a 32% surge in pre-tax profit to $3.5 million for the six months to end December on the back of record cotton production of 72,000 bales.
The earnings momentum is set to run further with the company’s total cotton area expanding by a quarter in the current financial year to 8,700 hectares and another 26.4% in 2014-15.
The water trading business complements its farming operations. Cotton is a water intensive crop and during times of drought, the company can sell its water rights instead to generate income.