As expected shares in Bendigo and Adelaide Bank fell sharply in early trading on Tuesday after a number of brokers downgraded the company’s share price expectations and the company came out of a trading halt for a major fundraising.
The shares fell to a low of $9.73 from last Friday’s last sale of %10.57, before the recovered during the day to end at $19.98, off around 5.5%.
Bendigo announced before trading that it had raised $250 million from major holders at $9.34 a share.
CEO Marnie Baker, said in yesterday’s announcement: “We are pleased by the high level of interest and demand from both our existing shareholders and new investors wishing to participate in the Placement.
“The successful Placement demonstrates strong investor support in our business and our strategy as we continue to evolve our business for the future”.
It will now look to raise $50 million from retail shareholders.
Given the capital raising was at a 9% discount to the last sale price, the end of session fall of around 5% means the issue was well-priced and the company retains the market’s confidence.
But some analysts were sceptical. For example, Macquarie Research cut its target for the regional lender from $9.50 to $8.75 while retaining an underperform rating.
“With persisting earnings pressures and the impact from the dilution, BEN’s return on equity profile remains challenged,” the investment bank told clients in a note on Monday’s weak results, dividend cut and $300 million fundraising.
“We continue to see risk to rebased dividend and find it difficult to justify BEN’s current around 19 percent normalised PE valuation premium to the majors at the offer price [for the proposed equity raising].”
And Credit Suisse has also put an underperform rating on Bendigo and cut its price target by $1 to $9 per share while Ord Minnett also dropped its price target to $9.25, down from $10, while keeping a ‘lighten’ rating (that’s sell into small rallies).