Motor maker on the edge, says analyst

Ross Green, chief executive of Wellington Drive Technologies. Photo / Paul Estcourt.

Wellington Drive Technologies, a North Shore-based manufacturer of energy-efficient motors, has reached its "most precarious position" in over a decade, says a prominent market watcher.

And the company's chief executive, Ross Green, is not ruling out the possibility of a takeover.

Around $40 million has been wiped off the value of the Albany-based listed firm in the two weeks since it announced a capital raising plan at the end of November.

The share price has plunged by 80 per cent during that time, from 7.5c on the morning of the announcement to 1.5c last night.

Green said: "People can draw their own conclusions from this, but when the company is arguably undervalued, that makes it a takeover target."

Market commentator Arthur Lim, a former Macquarie analyst, said the drop in the value of Wellington stock did not bode well for the company's capital raising, which is expected to open in early January.

The offer - a one-for-one renounceable rights offer at an issue price of 1.25c a share - aims to raise $8.4 million.

Lim said: "With the way that the share price has dropped and with the credibility of the company on the line now, I personally doubt that they will raise the money they are looking for."

Shareholders also liked to see a capital raising underwritten, he said.

Wellington's rights issue lacks an underwriter.

When it announced the capital raising last month, Wellington said it was holding higher than usual stock levels - partly because a major customer had deferred a delivery of refrigeration motors until early next year - which had a negative impact on available capital.

The cash the firm hopes to raise would be used to fund working capital required for expanding sales and operating losses expected until it achieves profitability, the company said.

Lim said there were likely to be a few Wellington shareholders who would "go for one last spin" and commit some more money to the firm.

The company was likely to raise some cash through the issue, he said, but not as much as it wanted.

Green said he did not want to speculate on how much of a success the rights issue might prove to be.

It was important to look beyond the market's response to the rights issue and understand the "fundamentals" of the company, Green said

Demand, sales and margins for the firm's products were tracking well, he said.

"But I can understand why there's a portion of the shareholder body that's ... getting impatient with us," Green said.

"It's our job to deliver on what the shareholder body expects and which is a decent commercial success."

Wellington's latest capital raising follows the completion of a share purchase plan and institutional placement in September that raised around $7.7 million for the firm.

In September 2009, the company raised $8.5 million through placement of shares with Australia's Hunter Hall Investment Management, its largest shareholder.

Meanwhile, Wellington last night announcement the appointment of Tony Nowell - a former Zespri chief executive - as chairman of the company.

He replaces Rick Boven, who will remain on the board of directors.

Wellington Drive Technologies

* Manufactures highly efficient electric motors for commercial refrigeration and ventilation systems.

* Corporate and R&D headquarters in Albany, with manufacturing facilities in China and Singapore.

* Sold over 600,000 motors in the year to December 31, 2009, but reported a bottom-line loss of $14.7 million during the same period.

* Has about 150 staff spread around the globe, with 51 of those in Auckland, plus up to 80 contract manufacturing workers in China.