Potential dilutive impact of 10%-12%: The deal would have a potential dilutive impact on FY09E EPS by about 10%-12% depending on whether the upsize option is exercised.
Alleviating the working capital strain: While the news highlighted that the cash will be used for capex, debt repayment and possible M&A, we believe that it will primarily be used to fund working capital needs for now as we noted that net cash generated from operating activities was a mere US$259,000 with cash conversion cycle increasing from 100 to 130 days as of 1H FY09. Some of the cash could also be deployed to fund its ongoing capex of US$350 million (2 multi-function support vessels & 1 AHTS for US$275 million and US$75 million for Vietnam yard expansion) but we believe this could be minimal as management has highlighted before that it has secured the required debt financing for the capex.
Gearing: Gearing would potentially come down from 47.1% to between 28.7 and 33.0% post the fundraising.
Valuation impact from the 2 MFSVs: We have not factored in the contribution from the 2 incoming multi-function support vessels to our valuations, which are slated for delivery from 2H 2009 and 1H 2010. With an improved cash position post the placement, Ezra should have no difficulty in taking delivery of these 2 vessels, which could potentially add another 20% to our SOTP.
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