In today’s briefing:
- Star Entertainment (SGR AU): A$800m Equity Raise to Buy Some Time
- Star Entertainment’s A$800mn Buffer
- Nitro (NTO AU): Potentia Comes Good with a Three-Part Offer
- Star Entertainment (SGR AU): A$800m Highly Dilutive Raise to Fix the Balance Sheet
- Millennium Services Group Ltd – Solid Growth Ahead with Contract Wins
Star Entertainment (SGR AU): A$800m Equity Raise to Buy Some Time
- Star Entertainment Group (SGR AU) is looking to raise A$685m via an ANREO of 3 shares in The Star for every 5 shares at a fixed price of A$1.2/share.
- The A$1.2/share price is a 21.1% discount to the last close and a 14.3% discount to the Theoretical Ex-Rights Price (TERP) of A$1.4/share.
- Short interest is near the highs and there is an index deletion pending. We’d look to buy the stock on a move lower, especially closer to index deletion.
Star Entertainment’s A$800mn Buffer
- Star Entertainment Group (SGR AU)‘s announced it intends to raise $800mn after reporting a statutory $1.26bn 1H23 loss.
- This equity raising will be broken down into a A$685mn non-renounceable entitlement Offer and a A$115mn institutional placement. The equity raising is fully underwritten.
- Star also announced it has secured covenant relief through to June 2025. Star’s immediate focus is to get its house in order and prove its suitability to hold casino licences.
Nitro (NTO AU): Potentia Comes Good with a Three-Part Offer
- Potentia has returned with an improved three-part offer for Nitro Software Ltd (NTO AU). The base offer of A$2.17 is 0.9% higher than Alludo’s A$2.15 offer.
- The offer could rise to A$2.20 or A$2.25 per share based on hitting additional conditions. There is a clear path for the final offer to reach A$2.20 per share.
- A A$2.25 per share offer is unlikely due to the onerous 25% scrip acceptance condition. At the last close, the gross spread to the likely final A$2.20 offer is 0.5%.
Star Entertainment (SGR AU): A$800m Highly Dilutive Raise to Fix the Balance Sheet
- Star Entertainment Group (SGR AU) will raise A$800 million with a fully underwritten 3:5 pro rata accelerated non-renounceable entitlement offer and institutional placement at A$1.20, a 13.6% discount to TERP.
- The equity raise of A$800 million will maintain leverage within the targeted 2.0x-2.5x net debt/EBITDA long-term range in our fines high-case scenario.
- Adjusting for the raise, Star trades at a discount to peers. While the shares will be under short-term pressure due to the raise, there is long-term value for the brave.
Millennium Services Group Ltd – Solid Growth Ahead with Contract Wins
- Millennium Services Group Ltd (ASX:MIL) has delivered a H1 FY23 result well below prior forecast, with a two-month timing lag between wage increases and pass-through impacting the gross margin over H1 FY23 (down ~190bps to 14%).
- With these costs now passed through under contract, gross margins improved in Q2 FY23 and are forecast to average around 15% for FY23, implying H2 FY23 margins of ~16%.
- This combined with ~$25m-$30m of new contract business wins over the past six months puts the business in good stead for solid growth in H2 FY23 and into FY24.
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