Eldorado Gold's Potential Equity Raise Concerns UBS

Apr.16.09 | About: Eldorado Gold (EGO)

Eldorado Gold Corp. (NYSE:EGO) appears ripe for the picking, but investors should be cautious of a potential equity raise down the road, says UBS analyst Dan Rollins.

Mr. Rollins upgraded his rating on the stock from "neutral" to "buy," saying the recent 20% depreciation in Eldorado’s share price from its
52-week high of C$11.58 per share back in February offer investors "an attractive investment opportunity to add to their holdings."

Even still, the analyst is concerned about the possibility Eldorado will take another run at an equity offering. He thinks Eldorado is well positioned to make an additional acquisition in the near future and believes the proceeds of an equity offering could provide Eldorado with the financial means to successfully bring an acquired project into production.

"Although the company withdrew its proposed C$275-million marketed equity offering in February, we continue to believe the risk of an equity issue remains. With the last equity offering attempted when the company’s share price reached its 52-week high, we believe caution is warranted at a share price above C$11."

Due to the equity raise overhang, Mr. Rollins trimmed his target multiple from 1.30x to 1.25x and reduced his price target from C$12 to C$11.50.