Ezra Holdings (Ezra) announced that it has entered into an agreement to place out 110m shares to institutional and other investors, as well as existing members of the company at an issue price of S$1.10. This represents a discount of about 8.4% to the VWAP of S$1.2007 for trades on 8 Mar 2012. Estimated net proceeds of about S$118.8m will be used for working capital and a range of other purposes. However, the group may still need more funds going forward. We tweak our sum-of-parts valuation to reflect the divestment of Ezion shares as well as the potential increase in share base when the above placement is completed, reducing our fair value estimate to S$1.28 (prev. S$1.51). Due to limited upside potential, we downgrade our rating to HOLD.
Placement to raise S$121m
Following its trading halt on Friday, Ezra Holdings (Ezra) announced that it has entered into a placement agreement with Credit Suisse and DBS Bank in order to raise capital. 110m shares (12.7% of existing share capital) will be placed to institutional and other investors, as well as existing members of the company at an issue price of S$1.10. This represents a discount of about 8.4% to the VWAP of S$1.2007 for trades on 8 Mar 2012, which does not seem too substantial.
For working capital and a range of purposes
After deducting associated costs and expenses, the placement is expected to raise about S$118.8m for Ezra. The group intends to use the funds for general working capital and corporate purposes and/or business opportunities, strategic investments, JVs and/or the paying down of existing debt, capital expenditure or vessel acquisitions.
Still needs more funds?
As mentioned in our 16 Jan 2012 report, out of Ezra’s US$357.5m short-term debt, we estimate that about US$140m of this comprises mainly vessel loans (secured debt) that may be rolled over to a longer term. However, embedded within its US$647.3m of long-term debt is a 4% convertible bond issue (US$100m) which bondholders are likely to redeem. Along with capex of about US$150-175m this year, we estimate the group would need to prepare at least US$460m for these purposes. After taking into account Ezra’s cash level of US$116m, this placement, and its recent divestment of Ezion shares, the group may still need at least US$207m more funds by the end of this year. This could be supported by divestment of non-core assets, as well as the debt markets.
Downgrade to HOLD
We tweak our sum-of-parts valuation to reflect the divestment of Ezion shares as well as the potential increase in share base when the above placement is completed, reducing our fair value estimate to S$1.28 (prev. S$1.51). Due to limited upside potential, we downgrade our rating to HOLD.
Following its trading halt on Friday, Ezra Holdings (Ezra) announced that it has entered into a placement agreement with Credit Suisse and DBS Bank in order to raise capital. 110m shares (12.7% of existing share capital) will be placed to institutional and other investors, as well as existing members of the company at an issue price of S$1.10. This represents a discount of about 8.4% to the VWAP of S$1.2007 for trades on 8 Mar 2012, which does not seem too substantial.
For working capital and a range of purposes
After deducting associated costs and expenses, the placement is expected to raise about S$118.8m for Ezra. The group intends to use the funds for general working capital and corporate purposes and/or business opportunities, strategic investments, JVs and/or the paying down of existing debt, capital expenditure or vessel acquisitions.
Still needs more funds?
As mentioned in our 16 Jan 2012 report, out of Ezra’s US$357.5m short-term debt, we estimate that about US$140m of this comprises mainly vessel loans (secured debt) that may be rolled over to a longer term. However, embedded within its US$647.3m of long-term debt is a 4% convertible bond issue (US$100m) which bondholders are likely to redeem. Along with capex of about US$150-175m this year, we estimate the group would need to prepare at least US$460m for these purposes. After taking into account Ezra’s cash level of US$116m, this placement, and its recent divestment of Ezion shares, the group may still need at least US$207m more funds by the end of this year. This could be supported by divestment of non-core assets, as well as the debt markets.
Downgrade to HOLD
We tweak our sum-of-parts valuation to reflect the divestment of Ezion shares as well as the potential increase in share base when the above placement is completed, reducing our fair value estimate to S$1.28 (prev. S$1.51). Due to limited upside potential, we downgrade our rating to HOLD.
No comments:
Post a Comment