The share price of The Erawan Group Public Company Limited (ERW) dropped ฿0.46/share or 10% to ฿4.14/share at the closing of the morning session on Wednesday with a trading value of 392 million baht.
The plummet in ERW share price came after the company reported a net loss of 1,715 million baht in 2020, contrasted to a net profit of 445 million baht in 2019 due to hotel closures in the year from Covid-19 outbreak.
Moreover, the Board of Directors resolved to propose the 2021 Annual General Meeting of Shareholders to consider and approve the increase of the registered capital of the company by THB 2,373,674,145 at the ratio of 1.25 existing ordinary shares to 1 newly issued ordinary share at the offering price of THB 1.00 per share to offer to the existing shareholders of the company in proportion to their respective shareholdings (Rights Offering).
Furthermore, the Board of Directors also approved to propose that the 2021 Annual General Meeting of Shareholders to consider and approve the issuance of the Company’s warrants to purchase newly issued ordinary shares No.3 (ERW-W3) at no cost (zero Baht) in the amount of up to 359,647,597 units for the allocation to existing shareholders of the Company in proportion to their respective shareholdings at the ratio of 7 existing ordinary shares to 1 unit of warrant, with a term of up to 3 years from the issuance date, having an exercise ratio of 1 unit of warrant per 1 newly issued ordinary share at an exercise price of THB 3.00 per share.
The 2021 Annual General Meeting of Shareholders is scheduled to be held on Tuesday, April 27, 2021.
KTB Securities (Thailand) (KTBST) stated that the capital increase of 1.25 existing shares to 1 new ordinary share at a par value of 1 baht for a total of 2,014 million shares represents a dilution of 35% from yesterday’s closing price at ฿4.60/share and a dilution of 44% to its EPS. The capital increase will unwind the overhang in ERW’s funding, but reflecting negative sentiment to the share price.
Meanwhile, the share outperformed SET Index by 26% in the past month from vaccine hopes. Still, KTBST recommended “HOLD” at a target price of ฿4.80/share as ERW’s has been traded on EV/EBITDA at 13x (-0.5SD below 10-yr average EV/EBITDA), compared to MINT at -1.0SD.