KUALA LUMPUR (Feb 12): Eastern & Oriental Bhd (E&O) is aiming to raise as much as RM550.3 million via a private placement and renounceable rights issue to fund its property development projects.
The proposed renounceable rights issue will include free detachable warrants on an issue price and basis to be determined later. The proposed private placement will involve issuing up to 10% of E&O’s issued share capital, currently at 1.31 billion stocks, E&O said in a filing with Bursa Malaysia yesterday.
Based on an illustrative price of RM1.20 per share, one rights stock for every four existing E&O stock and one warrant for every two stocks, E&O expects to raise between RM250 million and RM550.3 million.
Amid a prolonged soft property market, some analysts said it may be quite challenging for E&O to raise fresh capital. Further, the stock price is currently hovering at the lowest level since May 2012.
It would be interesting to watch if the company’s substantial shareholders will be committed to fully subscribe for the rights issue, analysts added.
Datuk Seri Tham Ka Hon, the company’s executive deputy chairman, is the single largest shareholder. Tham holds a 20.39% stake or 264.56 million shares, including an indirect stake of 16.74% through several investment vehicles, according to the company’s annual report 2018.
Meanwhile, Sime Darby Bhd is the second-largest shareholder with an 11.94% stake; the newly set up Urusharta Jamaah Sdn Bhd, which has taken over some assets from Lembaga Tabung Haji, holds a 7.22% stake; and Kumpulan Wang Persaraan (Diperbadankan) or KWAP 7.52%.
To meet the minimum subscription level of the proposed rights issue (which is the net balance sum of the minimum aggregate proceeds after taking into consideration the gross proceeds raised from the proposed private placement), E&O said it intends to procure written irrevocable undertakings from its substantial stockholders to subscribe in full for their respective entitlements and excess rights stocks (if necessary) under the proposed rights issue. The property developer will also make an underwriting arrangement.
Of the funds raised, as much as RM300 million will be allocated for property development and/or reclamation. Meanwhile, RM200 million will be used to repay borrowings and RM48.8 million for general working capital.
This article first appeared in The Edge Financial Daily, on Feb 12, 2019.