Investors dump Macmahon shares
The stock dropped heavily after coming out of a trading halt on Friday, closing 5¢ lower at 21.5¢ after earlier sliding to 18¢.
This week, it announced the sale of its construction arm to Leighton Holdings for $16.3 million, and downgraded earnings guidance.
The chief executive of Macmahon Holdings, Ross Carroll, warned its net profit for 2012-13 would be between nil and $25 million as the company had been forced to make substantial write-downs on its construction business.
Three months ago, Macmahon shocked investors with news that its annual profit would be about half the $56 million reported in 2011-12.
A senior analyst at Morningstar Equities Research, Ross MacMillan, said he had cut his net profit forecasts for the group to $2.4 million for 2012-13 from $24.3 million.
He described the capital raising as highly dilutive and advised investors not to take up their entitlements.
"However, if the shares trade above the offer price, there may be profitable opportunities for investors to take up their entitlements and sell shares on market," he said in a note to clients on Friday.
As its shares resumed trading, Macmahon said it had completed the book-build for the institutional component of its fully underwritten capital raising.
The company raised $42 million from institutions, who paid 16¢ a share. Existing institutional investors took up 86 per cent of the new shares. The offer is being used to strengthen Macmahon's balance sheet and expand its mining business.
Smaller institutions did not take up all their entitlements to the new shares, which were sold to other institutional investors and major shareholder Leighton Holdings.
Retail investors will be offered $38 million worth of shares from Wednesday.
Macmahon wants to become a dedicated full service mining contractor after offloading its construction business.
A major review of Macmahon's businesses and costs led to the axing of up to 50 jobs.
Macmahon expects to be hit by one-off costs of about $10 million as a result of its restructuring, and redundancy and closure costs.
Frequently Asked Questions about this Article…
Macmahon shares fell after the company launched an $80.7 million capital raising, sold its ailing construction business and downgraded earnings guidance. The stock dropped heavily when trading resumed, closing at 21.5¢ after earlier sliding to 18¢ as investors reacted to the write‑downs, profit warnings and the dilution from the capital raising.
The fully underwritten capital raising includes an institutional component that raised $42 million at 16¢ a share and a $38 million retail offer. It’s intended to strengthen Macmahon’s balance sheet and expand its mining business, but Morningstar called the raising highly dilutive — meaning existing shareholders’ ownership could be reduced if they don’t take up entitlements.
The article reports a Morningstar analyst advising investors not to take up entitlements because the raising is highly dilutive. However, the analyst noted a possible opportunity: if shares trade above the offer price, investors might buy entitlements and immediately sell the new shares on market for a profit. Ultimately it depends on the market price relative to the offer price and an investor’s risk tolerance.
Macmahon sold its construction arm to Leighton Holdings for $16.3 million. The sale follows substantial write‑downs in the construction business and is part of Macmahon’s plan to offload construction activities and refocus as a dedicated full‑service mining contractor.
Macmahon’s CEO Ross Carroll warned that net profit for 2012–13 would be between nil and $25 million after significant write‑downs on the construction business. Morningstar’s Ross MacMillan cut his net profit forecast for the group to $2.4 million for 2012–13, down from $24.3 million.
A major review of Macmahon’s businesses and costs led to the elimination of up to 50 jobs. The company expects to incur about $10 million of one‑off costs related to restructuring, redundancies and closures.
Institutions put up $42 million at 16¢ a share in the institutional book‑build. Existing institutional investors took up around 86% of the new shares. Some smaller institutions did not take up all entitlements; those shortfalls were sold to other institutional investors and to major shareholder Leighton Holdings.
Macmahon plans to use the proceeds to strengthen its balance sheet and expand its mining business, positioning itself as a dedicated full‑service mining contractor after offloading its construction operations.
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