Dijaya’s placement to fund growth

KUALA LUMPUR: Dijaya Corporation Bhd’s recently proposed private placement exercise will help it grow with minimal borrowings and allow higher institutional ownership of the company, said managing director Datuk Tong Kien Onn.

Last Thursday, the property developer proposed a 30% private placement exercise, amounting to between 136.91 million and 177.47 million shares, depending on the level of outstanding warrants and employees share option scheme.

An issue price has yet to be announced but will be determined based on the five-day volume weighted average market price (VWAMP) immediately prior to the price fixing date, with a discount not more than 10% and a minimum price of RM1.00, the par value of Dijaya’s shares.

The VWAMP as of Aug 17 was RM1.49. Using this as an indicative price, Dijaya can expect to raise between RM199.49 million and RM258.83 million.
“We are hoping to raise about RM200 million to finance our recent land acquisitions,” Tong told The Edge Financial Daily.

The proposal placement will help
Dijaya grow with minimal borrowings
and allowed higher institutional
ownership, said Tong.

“The private placement will do several things for us. First, it will help us partially finance our recent land acquisitions without placing pressure on our gearing which we hope to keep below 0.5 (times),” he said.

The private placement will result in a gross gearing of between 0.24 and 0.19 times. However, as payment becomes due on recent acquisitions, that ratio may rise.

Dijaya’s most recent acquisition is the purchase of 227 acres (90.8ha) in Plentong, Johor Bahru for RM220 million for a project to be called Tropicana Danga Cove.

“The placement will allow us to continue exploring opportunities for growth given our low gearing at the moment. As per our recent annual report, we are positive in terms of net cash, with RM240 million in cash and only RM211 million in borrowings.

“Second, a private placement will also create liquidity by increasing the number of shares,” Tong added, “which is very important for shareholders. Dijaya is not very liquid at the moment which makes it difficult to offload stock.”

He said, “We are currently talking to a wide range of investors, both local and foreign. Certain parties have approached us and expressed an interest in the placement, though we cannot disclose their identities at this time.”

With regard to the volatility in the market, Tong is aware of the risks but is positive on the outlook.

“A lower price may reduce the value of the placement but will be attractive to investors, whereas a higher price may be good for us, but may drive away investors. It will be a win-win situation as we have ample time before a price is actually announced — from now until regulatory and shareholder approvals. We will wait for the opportune moment to maximise value both for the company and investors,” he said.

If the placement goes according to plan, CEO Tan Sri Tan Chee Sing’s ownership will be diluted from 67.03% to 51.56%.

The placement will pave the way for institutional investors to increase their stakes in Dijaya, which has been held firmly by Tan for a long time.

TAEL One Partners Ltd acquired a 5% stake in Dijaya on July 4, and has since raised its stake to 7.25%.

Last Friday, Dijaya’s share price closed at RM1.48, down five sen or 3.3%, as the broader market slumped in the wake of a major sell-off on Wall Street.

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