Boral Limited completes Headwaters acquisition – Chart Review

Completed May 8 2017, it has been no mean feat for Boral. Headwaters, a concrete products manufacturer located near Houston Texas had a high price tag of US$ 2.6 billion, but its revenue for 2016 was US$ 1.1 billion, and it is expected to provide after four years, synergies of about US$100 million per annum to Boral’s US operations based in Atlanta.

The proposed acquisition was announced 19 November 2016, funded by debt of US$ 0.8 billion, an institutional placement of A$ 450 million, and a 1 for 2.2 renounceable entitlement issue of A$ 1.6 billion, at $4.80 per share.

Capital raisings, particular of this size, and at such a considerable discount to the previous market price, make me apprehensive. The share price dips to and often below the issue price, and is often then slow to rebound.

The weekly chart of Boral below displays the market response. From being in a steady uptrend, and finding support at $4.80, momentum stalled in the form of a head and shoulder pattern, with a high at $6.92, in the lead-up to the announcement.

 

BLD Wk May 2017 v2

Shareholders supported the capital raising and have been rewarded with a prompt rebound in the share-price. Today the previous high was almost equalled and surpassed.

An important technical milestone likely to be attained in the next few trading days is whether the $6.90 resistance level can be pierced and become a support level going forwards.

Readers are reminded that they should not base their investment decisions on technical analysis alone, but should obtain advice appropriate for their situation, from their stock broker or financial adviser.



Categories: Chart Analyses, Chart Review

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