Actually the balance sheet for a company of this nature remains...

Actually the balance sheet for a company of this nature remains weak (albeit improving) which presumably is why they are doing the cap raising.

NWH has three core businesses - a mining services contract business, a drill and blast business and a construction business. The former two can handle some debt but the latter should have significant amounts of net cash to demonstrate to potential clients it can handle any mistakes in contracts. Watpac is a good example here.

Traditionally NWH has targeted lower gearing levels than what they are currently at. There was significant concerns the company would survive and while they have reported a good 2016 financial year there is no room for error on their construction projects with the current balance sheet.

Another sign of the stress of the balance sheet is despite the company doing about 5cps in underlying NPAT this year (ignoring the profits from tax benefits) they paid no dividend.

This move will allow them to pay down debt and put them in a position to start paying dividends again (hopefully depending on the amount).

Prior to this raising the company was looking at spending the next 3 years focusing on paying down debt given the strict repayment schedule imposed by the bankers (another sign of debt concerns). Anyone who thought they had a solid balance sheet is kidding themselves.

Overall I'm happy though as they will now have some liquidity and breathing room for error on contracts. I'm tipping a cap raise price of 40c.