Labourers work at a garment factory in Bac Giang province, near Hanoi October 21, 2015. Vietnam's textiles and footwear would gain strongly from the TPP, after exports of $31 billion last year for brands such as Nike, Adidas, H&M, Gap, Zara, Armani and Lacoste. REUTERS/Kham
KUALA LUMPUR: Prolexus Bhd
is making a cash call to raise up to RM62.53mil in order to set up a garment factory in Vietnam as well as a fabric mill in Johor to expand into upstream garment production.
The apparels manufacturer announced to Bursa Malaysia on Friday a proposed renounceable rights issue of up to 62.53 million new 50 sen shares in the company -- at a price to be determined later -- together with the same number of free warrants.
This will be on the basis of one rights share and one warrant for every two existing Prolexus shares held by the company’s entitled shareholders on an entitlement date to be determined and announced later.
Of the proceeds, RM22mil is allocated for the Vietnam factory (land acquisition cost, however, will be paid with internal funds) while between RM31.85mil and RM38.93mil will be for the fabric mill.
Prolexus said the plant, to be constructed near the Tien Giang province in Vietnam, was part of its strategy to capitalise on the various benefits expected under the Trans-Pacific Partnership Agreement (TPPA).
The company noted that Vietnam had recently concluded the negotiations on the free trade agreement between the country and the European Union, which is expected to spur further growth in its export market to the region especially on the garment and textiles related products.
“The management anticipates the construction of the new factory to commence in 2016 and is projected to be completed and fully commissioned by 2017, with an initial production capacity of about 4.5 million pieces annually,” it said.
On the RM55mil fabric mill to diversify into upstream garment production, Prolexus said this would allow internal procurement of knitted fabrics produced in-house instead of purchasing from external suppliers.
“The production of its own knitted fabrics would allow better control over the supply chain of its garment production and position the group to conform to the yarn forward rule of origin under the TPPA,” it explained.
The management expects the fabric mill, to be built on 11.2ha in Kluang, Johor, to have an estimated annual production capacity of about 15.0 million yards.
The mill will be located about 60km from the group’s current main factory in Batu Pahat.
Prolexus shares gained 1 sen to close at RM2.67 on Friday.
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