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The Nationwide Grid (LSE: NG.) share worth has slumped greater than 10% on the time of writing on Friday.
It’s all about FY outcomes the day earlier than, on 23 Might. And the truth that the announcement included the shock information of a brand new £7bn fairness concern.
It’s supposed to fund the agency’s new development plans. CEO John Pettigrew mentioned: “We will be investing £60 billion in the five years to the end of March 2029 – that’s nearly double the level of investment of the past five years.“
The shares were already down 11% on results day. So as I write, we’re looking at a big double-digit crash in less than two days. Ouch!
Dividend cut!
It’s not the kind of company I expect to surprise the market like this. In fact, I’ve always seen it as a bit of a dull plodder.
It just pays steady dividends, year after year, with a clear vision of its future earnings and costs. Well, not this time. There’s a horrible word in this latest update, “rebased”.
The corporate mentioned: “We are going to keep a progressive degree of whole dividend rising from the present degree that the Board has really helpful for the 12 months to March 2024. This equates to a complete DPS (dividend per share) of 58.52p/share for 2023/24 which can then be rebased given the elevated variety of shares following the rights Situation.“
So the identical whole dividend money in future years, however divided by the enlarged variety of shares?
Low-cost shares
This information may need shareholders tearing their hair out. However please don’t, as the brand new rights concern appears like a candy deal to me.
Present shareholders may have the proper to purchase seven new shares for each 24 they at the moment personal. And, anticipate it… they’ll solely should pay 645p every for them.
That’s a full 43% under the closing worth on Wednesday, the day earlier than the information broke. And it’s nonetheless a reduction of 28% on the worth as I write.
An excellent purchase?
Is the Nationwide Grid share worth prone to fall as little as the brand new rights worth? The brand new concern is geared toward elevating £7bn of contemporary capital.
And the market cap, even after the two-day share worth slide, remains to be at £33bn. If the brand new concern actually does assist develop future earnings, then I reckon it may present a long-term market cap increase.
If something, I reckon the market has overreacted. And I may very well be tempted to purchase some on the new market worth, even with out with the ability to take up the brand new provide.
Valuation
The primary drawback for traders now could be that every one valuation measures, hopes and forecasts are up within the air. These fundamentals, for such a boringly predictable firm? Meaningless. And that’s the large danger.
We’ll have to attend till the mud settles earlier than we are able to get a deal with on the brand new worth of the inventory. But when I owned any Nationwide Grid shares, I reckon I’d snap up the rights provide.
And what a method to finish the week, with Nationwide Grid abruptly probably the most thrilling inventory on the FTSE 100!
