MENU

Paragon Care Ltd announces equity raising for acquisitions

Paragon Care Ltd (ASX: PGC) announced this morning that it would be undertaking a $69.8 million capital raising to fund a portfolio of acquisitions.

The capital raising is fully underwritten and will be made up of a $26.6 million institutional placement and a 1 for 2.8 accelerated entitlement offer to raise around $43.2 million at a price of $0.725 per share.

The acquisitions had already been announced to the market, but they are as follows.

Insight Surgical will be acquired for $5 million plus an ‘earn-out’ for FY18.

Medtech Solutions will be acquired for $2.4 million.

Seqirus ImmunoHaematology will be acquired for $8.5 million.

Management stated that these acquisitions continue Paragon’s long-term record of buying sensibly, integrating successfully and driving strong shareholder returns in a fragmented industry.

Paragon has calculated what the financial impact of the equity raising and acquisitions will be for FY18:

  • Pro-forma revenue forecast to be 71.2% higher to $222.6 million
  • Pro-forma earnings before interest, tax, depreciation and amortisation (EBITDA) up 85.9% to $34.4 million
  • Pro-forma net profit after tax (NPAT) up 97.7% to $20.9 million
  • Enterprise value up 55.2% to $243.5 million
  • Pro-forma earnings per share (EPS) up 21.4% to 7.7 cents
  • Pro-forma net debt to EBITDA ratio reduced to 1.4x

Paragon has a long-term target of $250 million and a target EBITDA margin of 15%, these acquisitions bring that goal much closer.

Management are looking to tap into the $200 billion per annum expenditure in Australia and New Zealand. This is expected to keep growing as the ageing demographics of Australia continue to affect the company.

Foolish takeaway

Paragon is currently trading at around 10x FY18’s pro forma EPS, which I think is a good price to pay for a growing business. Large acquisitions can be risky, so it would be good to see Paragon integrate the businesses effectively to know the acquisitions were worth the major equity raising.

Along with Paragon, one of these stocks is heavily tapping into the ageing population theme.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Paragon Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.