12.15
RBC CM Sector Perform, Average Risk, Price Target: $13.50
Freehold recently closed a bought deal financing that raised gross proceeds of $115 million through the issuance of 7.6 million trust units at $15.15/unit. CN Pension Trust Funds participated in the offering, maintaining its ownership stake in Freehold at 23%. Management intends to use proceeds of the offering initially to reduce bank debt and subsequently to fund capital spending and acquisitions. With the new equity, RBC CM forecasts 2010 exit net debt to cash flow of 0.3x, the lowest in the coverage group and well below the peer average of 1.6x. RBC CM continues to regard Freehold as a relatively low risk way for investors to gain exposure to crude oil prices given the minimal operating risk and high netbacks associated with its royalty interest lands. However, the units are fully valued at current levels.
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