Originally Posted by
steve fleming
Yep, you are probably right, the recent share price behaviour certainly suggests there is some maneuvering for a cap raise.
They should be able to make their $750k monthly repayments from operating cash (the $5.3m you noted was for 6 months, and with $12m estimated 2H EBITDA, 2H cash flows should be higher), however where the market takes a view (often without fully understanding the intricacies of the business) that a balance sheet is over leveraged, it is often best to bite the bullet and de-gear the balance sheet.
Personally, with debt ($28m) less than 1.5x EBITDA ($22m) and with an ICR of over 8x (EBITDA $10.1m / interest of $1.2m) i would not consider HDX to be highly geared, quite the opposite in fact, but if that's the view of the market, I am not going to argue against it.
Its a classic growth funding quandary - do you debt fund growth and avoid dilution and maximise returns to equity holders? or do you equity fund growth with a more conservative balance sheet to appease the market, but which provides equity holders with a lower return?
Anyway, with announced revenue growth of 62%, EBITDA growth of 83% and NPAT growth of 162%, and a number of brokers clambering over HDX for a piece of the action, a cap raising shouldn't be too difficult to get away at a reasonable price!