By Jenny Ruth
Thursday 23rd July 2009 |
Text too small? |
Australia-based Transpacific Industries' ability to pay dividends and satisfy working capital requirements will be constrained by weak earnings and low interest cover, says Sam Haddad at Aegis Equities Research.
That's even after the company's at least $A801 million ($NZ996.6 million) capital raising, Haddad says.
Transpacific, which took over Waste Management in 2006, is raising about $A747 million from a fully-underwritten rights issue at $A1.20 a share and $A64 million from a placement to private equity firm Warburg Pincus at $A1.80 a share. A secondary placement to Warburg Pincus could raise another $A110.5 million. The proceeds will go to pay down some of its $A2.1 billion syndicated debt facility.
Transpacific expects its operating earnings to be down 9% in the year ended June and the June half will be down about 25% on the first half. It won't pay a final dividend for 2009 and doesn't expect to pay a first-half dividend for 2010.
"While refinancing risks will ease substantially and gearing reduces following the capital restructure, risks remain will respect to Transpacific's earnings outlook," Haddad says.
The capital raising is "an important milestone," but "we continue to expect certain components of Transpacific's businesses to be less sheltered from the weaker domestic and New Zealand economies," he says.
BROKER CALL: Aegis Equities Research rate Transpacific Industries as sell.
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