KUALA LUMPUR (Oct 10): Loss-making Sanichi Technology Bhd, whose share price has been on the decline since April, is proposing a rights issue with warrants to raise some RM59.26 million on base case scenario — an amount that is more than its existing market capitalisation of RM48.9 million.
The fresh fund raised is to be used mainly for its property development activities.
In a filing with Bursa Malaysia, Sanichi said the proposed exercise involves up to 990.59 million new ordinary shares as well as 495.29 million warrants on the basis of two rights shares together with one free Warrant E for every one existing Sanichi share held by the entitled shareholders on an entitlement date to be determined later.
Meanwhile, the exercise price of the Warrants E shall also be decided by the group at a later date once it has obtained all relevant approvals before the entitlement date.
However, as Sanichi intends to raise a minimum of RM10 million, it will undertake the exercise based on the minimum subscription level of 100 million rights shares along with 50 million Warrants E, assuming that the rights shares will be issued at 10 sen each.
The 10 sen, said the group, represents a discount of about 13.6% to the theoretical ex-all price (TEAP) of Sanichi shares of 11.57 sen, based on the five-day volume weighted average market price (VWAP) of 16.27 sen up to and including Sept 27.
The precision plastic injection mould manufacturer, which diversified into property development in June 2014, said it plans to utilise the proceeds from the exercise mainly to identify and acquire landbank at strategic locations in Malaysia. It also expressed its interest to enter into joint ventures with third-party land owners.
“Upon acquiring suitable landbank, the group plans to undertake the development of the landbank which may be a residential or commercial or mixed development project or any other type of development that can only be determined by the group later based on its assessment on the feasibility of the development project,” it explained.
Sanichi added it has estimated a budget for its future property development activities based on a specific gross development value (GDV) target, whereby the typical land cost for undertaking a development project is 10% of the GDV.
However, it said depending on the eventual amount of proceeds raised from the proposed rights issue with warrants, the group may adjust its GDV target and budget accordingly.
Sanichi’s share price has tumbled from this year’s peak of 27 sen on April 10, to 16.5 sen yesterday. — theedgemarkets.com