On 26 June, Braemar (LSE: BMS) stock fell 17% after the company delayed publishing its audited full-year report and requested that its shares be suspended. However, the shipping broker also restated its expectation of record revenue and profitability for FY23.
What on earth’s going on here? And could this be a long-term buying opportunity?
What we know
Braemar has announced that its auditors are continuing to investigate a $3m transaction from 2013 that involved payments being made up until 2017.
This means that it will miss the 30 June deadline set by the Financial Conduct Authority (FCA) for the publication of its audited full-year results. In order to comply with the regulations, Braemar has requested that trading of its shares be suspended from 3 July.
In a statement, the firm said: “The board is not presently comfortable with the manner in which the transaction has been historically represented and the remaining liability recorded in the company’s balance sheet.”
It added that FRP Advisory Group, an independent specialist advisor, will help with the probe, along with an investigation committee led by Braemar’s non-executive chairman.
The statement also reconfirmed its expectation of reporting full-year record revenue (of at least £150m) and record underlying operating profits (at least £20m). The board also recommended a final dividend of 8p per share, which would bring the total payout to 12p, a 33% increase over the previous year.
What now?
After the company’s shares are suspended, investors will no longer be able to buy and sell the stock. But management says it expects to request a restoration of its shares upon publication of its full-year results. We don’t know how long that will take.
Two other London-listed firms — data specialist WANdisco and retailer Revolution Beauty — have also had their shares suspended in recent times. However, as things stand, this doesn’t seem comparable to these other two cases.
Revolution Beauty was already posting big losses before its shares were suspended in September. Meanwhile, the FCA’s probe into WANdisco is for an alleged “material misstatement” (around $115m in bookings) of its financial standings.
According to Braemar though, this is an ongoing investigation into a single historical transaction. And as mentioned, it has hiked the dividend by more than a third, which signals confidence in its financial position.
Therefore, it doesn’t appear that the business is in danger or about to disappear completely from the public market. Still, it’s clearly a worrying turn of events for shareholders.
Is the stock a buy?
Braemar listed on the London Stock Exchange in 1997. As things stand, this share price drop would represent its biggest one-day loss in over 23 years.
Yet the company remains a prominent international player in the shipping sector. So this big drop could represent a timely long-term buying opportunity.
Nevertheless, given the uncertainty, I’m going to keep the stock on my watchlist for now. I’ll wait for the dust to settle and re-assess the investment case, as and when I can.
In the meantime, there are many other opportunities out there for my portfolio.
