BCPG: Better Wait Longer

As soon as BCPG Public Company Limited (BCPG) announced the increase of the company’s capital by issuing up to 1,301.7 million newly-issued ordinary shares with the offering price of ฿11.50/share in order to raise about 10,000 million baht, investors poured a huge amount of BCPG’s shares…as a result, the share price on August 21, 2020 closed at ฿12.80/share, a 11.72% fall, with a trading value of 396 million baht.  

Generally, investors get very unpleasant with capital raising as it’s so far a bad sign, leading the share price of BCPG to lie down in the trenches. 

The Board of Directors’ Meeting of BCPG held on August 20, 2020 has resolved to approve the increase in the registered capital of the company to 16,508.500 million baht from 10,000 million baht. The issuance and offering of the capital increase divided into 1) allocated newly issued ordinary shares in the rights offering (BCPG-W1) with 2 warrants; BCPG-W1 and BCPG-W2.

2) Allocated newly issued ordinary shares in Private placement at a definitive offering price (BCPGW3).

Interesting question is:…Is BCPG’s capital increase worth investing…?

In the short-term, capital raising will cause an EPS dilution. The share price which falls below the threshold will later gradually increase to the offering price levels like in the case of MINT and GULF.

BCPG’s share will be affected sentimentally until the capital increase process completes.  

But in the long-term…regarding the purpose of this capital increase for repayment of some short-loans and to raise funds for use in expanding business investment both domestic and overseas…it will improve the firm’s financial structure and decrease D/E.  

Rome wasn’t built in a day, so is BCPG.

However, as a huge capital raising, it would initially cause an EPS dilution to those shareholders, but the majority of money from this working capital will exercise in increasing business value.

While analysts viewed the increase of the company’s capital will give a positive sentiment to BCPG’s profit outlook rather than dilution effect. 

Investors might have to wait a bit longer…but slow and steady wins the race…Don’t you agree?