AusGroup Ltd., a mining services company listed in Singapore, advanced the most in more than five years after the Perth-based company said it plans to raise S$15.2 million ($12 million) from a share sale.
The stock surged as much as 32 percent to 25 Singapore cents in its biggest gain since November 2008, and closed at 24 cents. The company will issue 96.1 million new shares at 16.8 Singapore cents apiece through a private placement, according to a Singapore stock exchange filing.
AusGroup plans to use half of the money raised as collateral to secure future lending, and the other half as general working capital. The company breached banking covenants in the quarter ended September after it reported a fiscal first-quarter net loss of A$15.1 million ($13.5 million), caused by the downturn in mining services, the company said in its results statement.
“The share placement will help the company to secure its lending lines from the banks and provide liquidity in the short term,” Lee Yue Jer, a DMG & Partners Securities Ltd. analyst, said by phone. “But the long-term fundamental issues remain. The low order book and returning to profitability are still the key challenges.”
DMG & Partners warned last month that AusGroup was “at serious risk of insolvency” and may be “burning cash,” noting that a low order book and asset use will continue to weigh on profitability.