Pacific Smiiles has announced a $15m placement and $5m share pruchase plan at $2.60 a share to improve liquidity and strengthen the balance sheet.
Morgan Stanley believes the most durable improvement to liquidity is actually achieved by growing earnings. Moreover, in terms of the balance sheet, by retaining earnings versus a 70-100% pay-out the company could have delivered a similar lift in cash.
In other words, returning capital to existing shareholders and then taking captial from new shareholders when returns are improving appears to the broker to be unnecessary.
Overweight retained. Target is $3.20. Industry view: In-line.
Sector: Health Care Equipment & Services.
Target price is $3.20.Current Price is $2.70. Difference: $0.50 – (brackets indicate current price is over target). If PSQ meets the Morgan Stanley target it will return approximately 16% (excluding dividends, fees and charges – negative figures indicate an expected loss).