Originally Published Wednesday, 17July 2013 Antares - AZZ Antares Energy has renegotiated terms for $14 million of expiring convertible notes, offering an attractive 10% yield over 10 years and an equity kicker should its shares trade above 66.7 cents. The company has also achieved flexibility to increase the total notes issue to $100 million, giving it firepower to remain independent of banksters, who have in the past held some companies virtual hostage with restrictive covenants. StockAnalysis thinks this is a no brainer. Would you rather sit on AZZ notes, enjoying a 10% pa yield and the prospect of converting into shares with an equity kicker at over 67 cents when the underlying equity already has an assessed value of over 80 cents, or would you prefer to buy the shares at 47 cents, get no income and wait for the next deal to mature so that you hopefully get taken out at a profit? Assuming that Antares successfully closes a US$300 million Permian Basin sale process, by early September it will be left with approximately A$1.14 per share of net cash pre-tax and net cash of about A$0.75 per share post-tax. StockAnalysis is comfortable with a total valuation of 80 cps for Antares, which makes its convertible notes attractive at a 66.7 cent conversion price. Over the years Antares has fought to retain staff, but has lost key people to higher offers in the industry, so its wage packets are not out of the ordinary. However, the value equation for Australian investors relies on a long term plan for asset based value improvement and ultimately a transaction based achievement of investment return. For those who could not wait, the company has happily paid out $19 million to shareholders who elected to sell their stock into an on-market buy back, thus improving the underlying value for those who have stayed the course. Longer term shareholders under current management have seen shares move from 6 cents to 60 cents
AZZ Price at posting:
45.0¢ Sentiment: Hold Disclosure: Held
