OCBC Investment Research has raised its rating for offshore marine services firm Ezra to "hold" after a recent price correction in the stock.
Investors had offloaded the stock after it announced on May 30 a rights issue and convertible bonds issue to raise about US$300 million. About 62 per cent of the gross proceeds will go towards repaying S$225 million of fixed rate notes due September this year, and 35 per cent towards repaying S$150 million of perpetual securities.
The counter fell 22 per cent in the past three trading sessions, closing at S$0.305 on Thursday. It slipped further on Friday, and was trading at S$0.295 as at 2.14pm.
While the market had already expected potential fund-raising moves, the size of Ezra's issue could have taken the market by surprise, said OCBC analysts Low Pei Han and Andy Wong in a report on Friday.
The two analysts expect the group to be able to raise the proposed US$150 million from the rights issue if shareholders approve it during an extraordinary general meeting. Ezra's largest shareholders Lee Kian Soo and Lionel Lee, who hold about 24.7 per cent of the firm, have both undertaken to fully subscribe for the rights issue; the remaining balance is fully underwritten by DBS and Credit Suisse.
"Given that the share price has corrected to S$0.305 versus our cum-rights fair value of S$0.32, we raise our rating to 'hold'," said the OCBC analysts.