Duell - Rights issue terms announced
Gross proceeds of EUR 20.2m, with up to 1b of new shares
Duell announced a fully guaranteed EUR 20.2m right offering, each shareholder will receive one subscription right on the record date which entitles its holder to subscribe for 33 offer shares at a subscription price of EUR 0.02. The net proceeds are expected to be roughly EUR 17.7m. The proceeds will be used to repay EUR 2.5m of its debt related to the facilities agreement and deferred purchase price of roughly GBP 4.9m related to the TranAm acquisition. In addition, the proceeds aid in executing the company's strategy for European expansion and overall self-help. We consider the left-over proceeds rather as an “insurance policy” and expect no further acquisitions in the short term. The TERP is slightly below EUR 0.03 for which the subscription price presents a discount of roughly 32.4%.
Strengthened balance sheet post RI reduces the risk level
With EUR 17.7m in net proceeds, Duell’s net debt to adjusted EBITDA ratio drops to roughly 3.7x when considering net debt at the end of Q4/23 and FY 23 adjusted EBITDA. The ratio still falls short of the company’s medium-term target for leverage of net debt to adjusted EBITDA of 2-3x yet is considerably healthier than the 7x at the end of Q4/23. Based on our current estimates, the net debt to adjusted EBITDA will fall below 3x at the end of 2024. Duell aims to repay EUR 2.5m of its credit facility, the impact on our interest expense forecasts is only slight.
HOLD (SELL) with a TP of EUR 0.03 (EUR 0.40)
Despite a stronger balance sheet reducing risk, we anticipate ongoing market weakness to continue to hinder the development operationally. The 2023 result doesn't support the current valuation, for 2024E, the valuation is relatively neutral when compared to our European peer group. The 2025E adj. EV/EBIT stands at 6.0x, which is already a low level. We see further self-help potential in 2024E and beyond, yet the visibility remains low. Considering the decline in share price since our latest update and the RI, we reduce our TP to EUR 0.03 (EUR 0.40) while adjusting our rating to HOLD (prev. SELL).