Downer EDI has announced a capital raise and trading update.
The company will raise $400m via a fully underwritten accelerated non-renouncable entitlement offer. The offer is priced at $3.75 per share, a 12% discount to last close.
The funds will be deployed to fund the -$135m acquisition of the minorities in Spotless, support -$150m in restructuring cash costs and retain gearing between 25%-30%.
The company expects to report FY20 earnings (UNPATA) of around $215m, which is approximately -9% below the UBS forecast.
The broker reduces EPS forecasts for FY21and FY21 by -12% and -17%, respectively.
UBS believes believes there is an ongoing strategic intention to shift the business model toward capital-light urban services.
Neutral rating maintained. Target is raised to $4.42 from $4.20.
Sector: Commercial & Professional Services.
Target price is $4.42.Current Price is $4.30. Difference: $0.12 – (brackets indicate current price is over target). If DOW meets the UBS target it will return approximately 3% (excluding dividends, fees and charges – negative figures indicate an expected loss).
