Ausgroup

Ausgroup: Ausgroup proposed a placement, with DBS Bank Ltd as its placement agent, to issue an aggregate 96.1m new shares at $0.168 apiece. The new shares represent 17% of the enlarged share capital, with the issue price at a 11% discount to the last closing price of $0.189 on 31 Jan 2013. Half of the net proceeds of $15.2m will be used to support the collateralization for the group's future bonding requirements, while the remaining will be for the group's general working capital. Recall, Ausgroup recently repaid its entire $27.9m senior bank debt and we estimate that the group would have just under A$7m in cash remaining on its balance sheet, assuming no cash had been spent since 30 Sep 2013. Market watchers expect the group to face higher interest costs and/or cheaper contract rates going forward, with a quick turnaround not within sight. We hypothesize that the worst may not be over for the beleaguered Australasian oil and gas equipment subcontractor and mineral resource player, following the slowdown in the Australian resource sector. At $0.189, Ausgroup trades at 0.51x P/B, below its long-term average of 1.2x.