CAT Details
Capital raising for strategic acquisitions: Catapult Group International Ltd(ASX: CAT) stock price was smashed 4.4% on May 02, 2017. The group has successfully completed a $14 million placement under which new shares are said to be issued at $2 a share (2.9% discount to the last close). The equity raising was confirmed via brokers Bell Potter Securities and Morgans Financial. CAT is, in fact, looking to raise another $3 million through a share purchase plan (again price at $2 per share). The group intends to make use of the funds for two acquisitions of strategic importance and for supporting existing working capital requirements.

Guidance reiterated: The group has maintained its FY17 revenue guidance of between $61 million and $65.5 million (21%-30% pro-forma growth in FY17) and aims to deliver positive underlying EBITDA. This has been based on the decent trading update by the group. CAT has also announced various League-wide deals in second half of FY17. The group is also targeting full prosumer product release in FY18. The significant upgrade in the form of PLAYERTEK is expected to help CAT to venture into an unpenetrated market for wearable devices.
 

Trading Update (Source: Company Reports)
 
Recommendation: CAT intends to bring high gross margin products through the indicated acquisitions while the existing global sales platform will be leveraged. These acquisitions are expected to generate additional revenue streams. In the past six months (as at April 28, 2017), the stock has fallen 41.6%. It is important to note that CAT has been trading at a price which is below the price offered in share purchase plan, as at May 02, 2017. The stock was under a trading halt on May 01, 2017 owing to the above pending announcement. Given the prospects ahead, we maintain our “Speculative buy” recommendation at the current price of $ 1.97

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