Zelan to have ‘clean slate’ after restructuring

KUALA LUMPUR: Loss-making Zelan Bhd is set to clean up its balance sheet after shareholders approved a corporate restructuring exercise.

“It will take time for us to start making a profit again. However, the corporate restructuring exercise will give us a clean slate and hopefully, we will be on the radar again with a cleaner balance sheet,” said Zelan managing director Datuk Mohd Nor Idrus.

Mohd Nor told reporters after the company AGM and EGM yesterday the restructuring plan will effectively “wipe out” Zelan’s total accumulated losses and pare down its debt.

He said that while one financial year will not be enough to turn the company around, Zelan has an order book of about RM4 billion, including its concessions. “Like most construction companies, our order book will last about two to three years. However, our revenue will also come from the PFI [private-finance initiatives] of our concessions.”

In March last year, the firm was chosen by the government to construct the Gombak integrated transport terminal (GITT), which comes with a 25-year concession.

The GITT will take 27 months to be built and will cost RM307.37 million. The terminal will also be integrated with the existing Gombak light rail transit station.

Mohd Nor declined to reveal Zelan’s tender book, although he said the firm was bidding for a project in Pengerang, for which the tender will close on Oct 16.

Apart from FY12 ended March 31, Zelan also slipped into the red in FY09, and losses piled up on its balance sheet. The restructuring exercise is aimed at reducing its accumulated losses and debt level. As at 1QFY14 ended June 30, its total accumulated losses stood at RM384.69 million, while total borrowings were RM416.22 million. Its shareholders’ equity dropped to RM152.05 million from RM475.18 million at end-FY09.

Mohd Nor: It will take time for us to start making a profit again.

“The proposed par value reduction (from 50 sen to 10 sen) will enable us to reduce our accumulated losses via the cancellation of our issued and paid-up share capital that is not represented by the available assets of our company.

“The existing Zelan shares have been trading below their existing par value of 50 sen for the past one year and it is not conducive for us to embark on any fundraising and/or corporate exercise involving a new issuance of shares without undertaking the proposed par value reduction,” Zelan explained in the circular.

Meanwhile, the firm said its biggest shareholder, MMC Corp Bhd, had agreed to subscribe to its full entitlement of Zelan rights shares, which is 39.25% of the 281.63 million proposed rights shares.

Since the release of the circular in early September, Zelan has not devised the issue price of the rights shares or the strike price of the warrants, although it said the warrants were exercisable within five years of the issue date.

Zelan has proposed a series of exercises, including disposing of 56.67 million of its shares in IJM Corp Bhd, reducing its share par value by 40 sen to 10 sen each, and a one-for-two rights issue that comes with a free detachable warrant. The restructuring is expected to be completed by end-FY14 ending March 31.

Yesterday, Zelan shed half a sen to close at 25 sen, with 803,600 shares transacted, giving the company a market capitalisation of about RM144 million.

This article first appeared in The Edge Financial Daily, on October 01, 2013.


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