Fletcher Building shares gain on $543m institutional raise
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The news: Fletcher Building shares gained at market open on the ASX after completing the placement and institutional entitlement offer component of its NZD700 million ($642 million) equity raise, announced on Monday.
The numbers: Fletcher shares rose 2.3% to $2.66 by 10:50am AEST, having lost more than 40% since January.
The placement and institutional entitlement offer raised gross proceeds of around NZD593 million. Fletcher said it received "strong support" from investors, with eligible institutional shareholders electing to take up 91% of the offer.
The retail component of the entitlement offer will open on Thursday and close on 8 October. It is available to eligible retail shareholders at an offer price of NZD2.40 per share, the same as the placement and institutional entitlement offer.
The context: Citi analyst Samuel Seow said Fletcher's equity raise was "better later than never". While the timing is more delayed than he expected, Seow called the move "a net positive for the business", particularly given that the rate cut cycle has begun in New Zealand. Citi kept its target price on Fletcher at NZD2.97.
Morgan Stanley analysts noted that while the equity raise "takes one risk off the table", they see risk of further rebasing of earnings. They flagged that the timing of the raise and related comments from the company suggest volumes "will be at the low end of the down 10-15% guidance range" for FY25.
Morgan Stanley retained its 'equal-weight' rating on Fletcher but reduced its price target from $2.66 to $2.478. It also reduced its earnings per share forecast by 12% in FY25 and 14% in FY26.
JP Morgan analyst Al Harvey noted that the equity raise results in "minimal changes" to its forecasts for Fletcher, though FY25 NPAT is expected to increase due to lower interest payments on debt. JP Morgan, which is 'neutral' rated on Fletcher, reduced its valuation 12% to NZD2.85 per share owing to the 292 million of new share issued through the raise.
What they said: "We are very pleased with the success of the institutional offer, and the strong support shown by investors," said Fletcher Building director and incoming CEO and managing director Andrew Reding.
"The capital raise will strengthen Fletcher Building's balance sheet, and improve financial resilience in the current environment," he said.
The source: ASX announcement
