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Falling Knife of the Week: AusGroup Limited

ausgroup_logo AusGroup Limited (SGX: 5GJ), fell 20% thus far this week, making it steal the spot for Falling Knife of the Week. The shares last exchanged hands at $0.20.

AusGroup is involved in the marine and offshore drilling sector. The main business of the firm is to provide subcontract services to the oilfield equipment manufacturing companies in the South East Asia region through its fabrication and machining facility in Singapore.

In the middle of last month, the company, during its first quarter of 2014 results announcement, mentioned that it had “breached covenants under its banking facility agreements, as a result of the impact of the lower Earnings before Interest Tax Depreciation and Amortisation (EBITDA) on its various ratios”.

On Tuesday and Wednesday this week, AusGroup made an announcement that it has fully repaid its senior debt facilities and has cash-backed all bank guarantee facilities with the banks of Australia & New Zealand Banking Group Limited and HSBC Australia Pty Ltd. The company is currently in discussion with the banks to resolve all breaches on lending covenants and limit the banks’ security over AusGroup’s assets to the cash that remains on deposit to support the existing facilities.

The company also added that it has sufficient cash to meet daily operational needs over and above that used to back all its guarantees.

AusGroup is currently trading at 8.5 times its FY2013’s earnings.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.