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Stocks to buy that may raise equity


June 3, 2020

This list looks at 10 companies which are tipped to potentially raise fresh equity in the period ahead.

Tabcorp: saddled with close to $3 billion in debt, hit quite hard by COVID-19 and has been tipped as a likely prospect to raise $500 million in fresh equity in The Australian's Dataroom column on March 26.

Crown Resorts: badly hit by COVID-19, pressed ahead with a recent $200 million dividend and still has a heavy spent to finish its Sydney casino project.

Sydney Airport: with close to $10 billion in debt and very little revenue, the longer international travel is banned, the more likely Australia's most valuable airport will need to raise capital.

Transurban: is saddled with Australia's biggest corporate debt of $19 billion, which even exceeds BHP. Is still cash positive during the shutdown but also has a heavy capital program and blowouts on its West Gate Tunnel project to contend with. Has raised more fresh capital than anyone over the past decade, so no reason why it won't go again.

Scentre Group: the REIT sector tends to play follow the leader and we've already seen raisings from the likes of National Storage, Centurian Industrial , Charter Hall Retail and Charter Hall Social Infrastructure, so don't be surprised if the big daddy goes as well to try and pay down its circa $13 billion corporate debt.

ANZ: once the NAB SPP is finalised, don't be surprised if ANZ goes with a capital raising, potentially even a standalone SPP, that will allow it to resolve the question of its deferred dividend.

Star Entertainment: just like Crown and Tabcorp, went into the COVID-19 crisis with too much debt and then saw its 3 casinos shut down just as it is cranking up spending on its Queens Wharf project in Queensland.

Downer: any company which cancelled their interim dividend has to be a chance to raise capital and Downer is carrying plenty of debt.

Qantas: arguably in the strongest position of any airline in the world but is still being hurt by the cash-burn and is more exposed operationally than Virgin Australia given the size of its international business, which will take longer to come back.

PREVIOUSLY TIPPED STOCK WHICH DID RAISE EQUITY

Vicinity Centres: a similar story to Scentre Group with large debts although should be reluctant to issue fresh equity at such a steep discount to NTA. Therefore, stand by for a $1 billion-plus full year loss due to write-downs in August and then potentially an equity raise priced at something nearer to the new audited NTA.