MCGRATH SHARES SURGE AFTER CASH INJECTION

LISTED real estate agency McGrath is selling a 15 per cent stake to property developer Aqualand in a deal which will give it a $10.7 million cash injection.

Aqualand has already acquired an 8.7 per cent stake in McGrath and will take a further 6.3 per cent share if the deal is approved by the real estate group’s shareholders.

McGrath has struggled since listing on the share market in 2015.

It posted a $25.5 million loss for the six months to December and in March halved its full-year earnings guidance.

The company yesterday said it expects its full-year underlying earnings to be at the lower end of the revised guidance range, at approximately $5 million.

About $4 million in oneoff cash costs will result in reported earnings of about $1 million, McGrath said.

McGrath chief executive Geoff Lucas said building relationships and channels was more important than ever before.

“McGrath is currently in a stabilisation and turnaround program and this transaction and relationship underpin our momentum to return to being Australia’s pre-eminent residential property brand,” he said.

The capital raised will allow the company to take advantage of any strategic acquisition opportunities that arise over the next couple of years, Mr Lucas said.

Aqualand has a portfolio of 18 residential sites in Sydney, with a gross value of about $5 billion.

It will be entitled to a director on McGrath’s board, and it will give McGrath first right to discuss being agent to its new projects.

McGrath founder John McGrath, who will remain the company’s largest shareholder, said the addition of Aqualand as a strategic shareholder was a great vote of confidence in McGrath’s future. Shares in McGrath closed up 26 per cent or 9¢ yesterday at 43¢.