Plexus Holdings PLC (AIM:POS) equity raise will help the engineering firm unlock a value-adding pipeline of opportunities.
Proceeds from the raise, announced earlier on Wednesday, will pay for the manufacture of new kit, to double in size the firm’s well-head rental inventory.
It puts Plexus in a ‘strong position to participate meaningfully’ in the rental market for jack-up well-heads, that’s according to stockbroker Cavendish, which is one of the firms arranging the raise.
“We estimate that the additional eight sets ordered after the fund-raise will add about £4.7m annualised revenue, thus the expanded total rental fleet (16 sets) should generate at about £9.5m annualised revenue (at a 65% gross margin),” Cavendish analyst Ian Mcinally said in a note.
The analyst added: “Plexus is well known for its expertise in Jack-up exploration drilling and mudline suspension systems and has knowledge of many of the legacy wells in the North Sea and worldwide which are now being considered for decommissioning (plug and abandonment, P&A).
“In the North Sea alone, for example, around 1,000 wells are currently scheduled to be decommissioned by 2027.
“With an expanding partner network, management has positioned the business to support offshore activities in P&A work, gas and carbon capture and storage (CCS), as well as continued oil and gas drilling and development in other territories around the world.”
Cavendish pitches a price target of 22p for Plexus, implying more than 200% upside to the current price of 6.95p.
This morning, the company also gave investors a trading update that confirmed its return to profitability, driven by growth in its Jack-up rental wellhead business and revenue from a large special project. The company confirmed trading this year is in line with market expectations, and it ended its first half (to 31 December) with a £1.3 million cash position.
Plexus sees strong demand for Jack-up rental wellheads, supported by expected higher rig rates in the coming years.
It has already identified a £59 million sales pipeline, with £27 million in potential revenue for the 2026 financial year and £32 million in 2027.
The equity raise meanwhile will bring in £3.5 million with new shares issued at 6.5p per share, a 3% discount to the last closing price.
In London, Plexus shares moved higher, climbing 3.7% to 6.95p in Wednesday’s deals.