The market may be sinking notably lower today but the same cannot be said for the InvoCare Limited (ASX: IVC) share price.
The funerals company's shares have missed out on the broad market selloff today after being placed in a trading halt this morning.
Why are InvoCare's shares in a trading halt?
This morning the company requested a trading halt whilst it seeks to raise $85 million through a capital raising. This will comprise a $65 million fully underwritten institutional placement and a $20 million share purchase plan.
The institutional placement price will be determined by way of a variable price bookbuild with an underwritten floor price of $13.30 per share. Whereas the share purchase plan will be priced at the lesser or the issue price of the institutional placement of the volume weighted average price of its shares traded in the five working days up until the final acceptance of the plan.
The net proceeds of the capital raising will be used to provide incremental balance sheet flexibility.
InvoCare's CEO, Mr Martin Earp, expects the capital raising to allow the company to push ahead with its growth strategies at a suitable pace.
He said: "We have structured our funding policy to retain an appropriate level of flexibility to allow for both of our growth strategies to continue at an appropriate pace. Having received encouragement from shareholders and investors, we are now pleased to provide eligible shareholders with the opportunity to invest as we continue a disciplined acceleration of our growth capital investment program."
InvoCare's pro forma leverage ratio at the end of FY 2018 was 2.99x net debt/EBITDA. Upon completion of the institutional placement (prior to any proceeds from the share purchase plan), the company's pro forma leverage ratio will reduce to 2.50x.
Should you invest?
Overall, this seems like a smart move by management, especially after the recent rally in its share price, and I believe it should put it in a stronger position in the future.
However, it isn't enough to make me want to invest and I will continue to sit on the sidelines with this one until its shares trade at a level which I think offers a sufficient risk/reward.
Until then, I would sooner invest in other consumer discretionary shares such as Aristocrat Leisure Limited (ASX: ALL) and Collins Foods Ltd (ASX: CKF).
