Daily ShareChat: Freightways

Freightways' $50 million capital raising to strengthen its balance sheet will reduce its forecast net debt to operating earnings for the year ending June 30 from 3.1 times to 2.4 times, says ABN Amro Craigs analyst Geoff Zame.

A placement of $45 million to institutions was completed in early April and Zame is expecting full take-up of the $5 share purchase plan which opens on May 11. If that's the case, about 20.5 million new shares are likely to be issued in total.

Shareholders are being offered up to $12,500 worth of shares each priced at the lesser of $2.44, the price the placement shares were issued at, or the volume weighted average market price in the five trading days before May 11. The shares ended last week at $2.92.

"Freightways management, strategy, market position and historical financial performance are well regarded and well understood by the market." Zame says.

The issue lowers his valuation of the shares on a discounted cashflow basis from $3.62 to $3.46.

Last week, Freightways said net profit for the nine months ended March was $24 million, up 4% on the same period a year earlier. It said it hadn't experienced any deterioration in operating performance since December but continues to experience similar trend of fluctuating volumes and lower activity from some existing customers, making it difficult to forecast near-term performance.

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