Daily ShareChat: Wellington Drive Technologies

By Jenny Ruth

Tuesday 8th September 2009

Wellington Drive Technologies is likely to announced yet another equity raising within the next two months because without one it will run out of cash just before year end, says Forsyth Barr analyst Andrew Harvey-Green.

He says the first-half result, a net loss of $9.9 million, and net cash of $2.9 million after the company burned through 11.6 million, was worse than expected. The January prospectus, which aimed to raised $11.4 million and achieved $10.75 million, had forecast a $7.6 million cash burn.

"The largest disappointment of the result was the announcement that the Panasonic deal that WDT had been working on has fallen over," Harvey-Green says.

"We se this as a significant setback as, not only does it impact on future cashflow projections, but we believe it will have also negatively affected WDT's capital raising process and discussions with any cornerstone investor," he says.

Harvey-Green is forecasting the cash burn rate in the second half will drop significantly but he says that assumes the company's cost-out program is successful and that inventory is cut by almost $2 million despite sales increasing 37%. He expects a $15.6 million full-year net loss.

He has cut his valuation of the stock to 20 cents from 27 cents previously.

BROKER CALL: Forsyth Barr rate Wellington Drive Technologies (NZX: WDT ) as reduce (from hold).

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