Propel Funeral (ASX:PFP) share price edges higher on Share Purchase Plan opening

The company’s shares are in the green…

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The Propel Funeral Partners Ltd (ASX: PFP) share price is pushing into positive territory during late afternoon trade. This comes after the funeral operator provided an update on its capital raising efforts today.

At the time of writing, Propel Funeral shares are 0.47% higher at $4.25 apiece. In comparison, the All Ordinaries Index (ASX: XAO) is hovering 0.05% lower to 7,755.4 points.

What did Propel Funeral announce?

According to the release, Propel Funeral advised it has opened up a Share Purchase Plan (SPP) following a successful placement.

On October 19, the company revealed that it has received overwhelming support to raise $50.2 million via an institutional placement. The firm commitments came from new and existing institutional investors.

About 12.25 million shares were issued at a price of $4.10 per share. This represented a 7.2% discount to the last traded price of $4.42 before the announcement on 15 October.

The company decided to allow its remaining shareholders to participate in a $10 million SPP based on the following terms.

The new shares to be issued under the SPP will be offered at an issue price equal to the lowest of:

  • $4.10, being the placement price;
  • a 2% discount to the 5-day volume weighted average price of Propel Funeral shares traded on the ASX up to and including the closing date of the SPP; and
  • a 2% discount to the closing price of Propel Funeral shares traded on the ASX on the closing date of the SPP.

Eligible investors will be able to apply for up to a maximum amount of $30,000 worth of new shares.

Furthermore, Propel Funeral directors also confirmed their intention to participate in the SPP.

The closing date for the SPP will fall on 17 November, with allotment on 23 November.

The funds raised will be used to pay down debt in providing financial flexibility to pursue further growth initiatives. Upon completion of both placements, Propel Funeral’s historical pro forma will see the following:

  • Net leverage ratio will reduce to around 1.1 times; and
  • Available funding capacity will increase to about $150 million.

Management commentary

Propel Funeral managing director Albin Kurti, touched on the placement, saying:

We are delighted by the support received from Propel’s existing institutional shareholders and to be welcoming new institutional investors, who will broaden Propel’s share register.

… We believe this is the right time to further strengthen our balance sheet, as the Company seeks to continue to execute on its acquisition led growth strategy in what is a highly fragmented industry.

About the Propel Funeral share price

Over the past 12 months, Propel Funeral shares have rallied around 45% higher, reflecting modest investor sentiment. However, since the start of 2021, the company’s share price is up almost 50% alone.

On valuation grounds, Propel Funeral presides a market capitalisation of roughly $486.8 million, with approximately 114.5 million shares outstanding.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Propel Funeral Partners Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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