Sign up Australia
Proactive Investors - Run By Investors For Investors

Countrywide looking at a rights issue to raise more than the current market cap of the group

Numis expects that Countrywide's second half earnings will also be down materially year-on-year
Interior of a house
The new shares could be offered at a 30% discount to the current share price

Estate agents rarely get much sympathy and Numis Securities has not been slow to stick the boot into Countrywide PLC (LON:CWD) after yesterday’s profit warning.

The broker has got off the fence – it previously rated the shares as a ‘hold’ - and recommended its clients sell the shares after Countrywide flagged up a material reduction in profit estimates and the need to raise new capital.

READ: Countrywide plunges after signalling need for fresh capital following another profit warning​

The broker has slashed its forecast for 2018’s earnings before interest, tax, depreciation and amortisation (Ebitda) by 35% to £32.4mln.

Shares in Countrywide were down 5.6% at 51.9p following the downgrade, valuing the entire company at around £131mln.

Management has previously targeted a net debt/EBITDA ratio of 1.5-2.0 and based on that Numis thinks the company will need to raise around £143mln (net) – or £153mln gross - in what looks like an inevitable rights issue.

Numis’s back of a fag packet estimate is that the new shares will be offered at a 30% discount to the current share price.

“FY2017 net debt stood at £192mln, and given low H1 [first half] EBITDA we think it will have risen to c.£200mln - suggesting net debt/EBITDA of 6.25x in FY 2018. Accordingly the group ‘is looking to put a long term capital structure in place’, with an intention to reduce debt by at least 50% through equity finance. Oaktree (c.30% shareholder) has stated that it is supportive and Countrywide will give more details at its interims,” the broker said.

Numis said a right issue would lay to rest balance sheet conc3erns but it reckons profits would need to more than double from this year’s projected level to make the shares look attractive following the rights issue.

In anticipation of a discounted rights issue, the target price has been reduced to 38p on a pre-rights basis.

View full CWD profile View Profile

Countrywide Timeline

Related Articles

Belvoir
September 13 2018
At 61,000 properties under its management, Belvoir is the UK’s second largest lettings agent
Kenya
October 02 2018
The Africa-focused property trust raised US$132mln when it joined the London market
Care room
September 05 2018
It is not the only listed operator in the healthcare sector but it is one of the few property companies to offer exposure to what is a low-risk, non-cyclical market

No investment advice

The information on this Site is of a general nature only. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You acknowledge and understand that neither the Company, its related bodies corporate, the information providers or their affiliates will advise you personally about the nature, potential value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You should read our FSG and any other relevant disclosure documents and if necessary seek persona advice prior to making any investment decision.

You understand and agree that no Content (as defined below) published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person.

You understand that in certain circumstances the Company, its related bodies corporate, the information providers or their affiliates may have received, or be entitled to receive, financial or other consideration in connection with promoting, and providing information about, certain entities on the Site and in communications otherwise provided to you.

You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Before you act on any general advice we provide, please consider whether it is appropriate for your personal circumstances.

© Proactive Investors 2018

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use