SINGAPORE (May 18): DBS has downgraded Pacific Radiance from “hold” to “fully valued”, lowering its target price to 10 as liquidity issues cloud its outlook.
“We tweak our P/BV multiple downwards to 0.2x FY17 net book value, to account for the increased liquidity risk, which lowers our TP to $0.10. Downgrade to ‘fully valued,” says analyst Suvro Sarkar in a Thursday report. As at 3.29pm, shares of Pacific Radiance are currently trading at 12 cents.
In 4Q17, cash balance fell sharply to US$15.2 million ($21.2 million) from US$42.2 million in 4Q16. The decline was driven mainly by the negative operating cash flows of US$13.1 million during the quarter and net debt repayments of US$18.6 million. According to analyst Suvro Sarkar, operating losses are likely to continue in subsequent quarters. Also, Sarkar believes the $100 million note which is due in August 2018 will still pose a major liquidity problem.
Management has indicated near-term sources of liquidity such as a $15 million bridging loan facility from SPRING Singapore and a yet-to-be-approved $70 million facility under the internationalisation Finance Scheme. “However, our understanding based on public disclosure is that the IFS loan is to be used only for fixed asset purchases, project financing and M&A financing,” says Sarkar, “Thus, we are unsure how this can help support working capital outflows.”
