RE:AssessmentHere's a follow-up. GLTA
Can I have your thoughts on the recent bought deal; the market does not seem to be pleased?
Bought deals typically result in short term weakness. The stock has done well yet remains cheap at 10X earnings. Its small size and cyclicality add risk, but it may do well in a lower-rate environment. One of our concerns on it has always been its leverage, so reducing debt with this issue may improve the valuation multiple. That being said, ADEN specifically also says it may use the $$ for acquisitions as well. The discount on the deal is more than $2/share. It is not our favourite small cap, but momentum has shifted to the positive (other than the issue dip) and we would be OK buying a position for small cap investors comfortable with a cyclical stock. (5iResearch)