PETALING JAYA: Malaysian Resources Corp Bhd (MRCB) has received resounding approval for its proposed renounceable rights issue, with some 89% of its shareholders voting for the cash call.
The exercise, which will raise some RM2.2bil, will not only pave a smooth path for MRCB’s biggest fund-raising exercise, but will also see its gearing being reduced significantly.
Both the major shareholders of MRCB, the Employees Provident Fund (EPF) and Gapurna Sdn Bhd, which hold 33.48% and 16.63%, respectively, will be undertaking this portion of the rights share, and may also apply for the excess.
Gapurna is a private vehicle of MRCB’s managing director Tan Sri Mohamad Salim Fateh Din.
“Gapurna’s undertaking clearly shows management’s commitment to growing the company as it will be pumping capital into the company,” said an analyst.
Via Gapurna’s 16.63% stake in MRCB, Salim will be entitled to subscribe for 418.18 million rights shares (assuming he exercises all his warrants).
Based on the assumed indicative issue price of 85 sen for the rights, Salim will be forking out roughly some RM355.45mil for the exercise. Following this, Gapurna will have a 14.64% stake in the company, along with 83.64 million free warrants.
Shares of MRCB closed three sen lower to RM1.22 on a volume of 22 million shares.
When the rights issue was first announced on May 18, MRCB had stressed that the money essentially would be used to finance its current refurbishment work in Bukit Jalil, pare down borrowings and fund some of the existing property development and construction projects.
MRCB is currently in the midst of selling its Eastern Dispersal Link (EDL) highway, and so far, it has been reported that there are two suitors.
As at Dec 31, 2016, MRCB’s borrowings amounted to approximately RM2.94bil, which includes more than RM1bil bonds linked to the EDL highway in Johor.
“If the EDL is sold, coupled with the proceeds from the rights, then MRCB will have virtually no borrowings,” said an official close to the company.
MRCB is undertaking refurbishment work for the National Sports Complex in Bukit Jalil, in exchange for 76.14 acres in Bukit Jalil from the government. The refurbishment work will cost some RM1.39bil.
The EPF has taken up a substantial stake in this Bukit Jalil project, with it buying an 80% stake in Bukit Jalil Sentral Sdn Bhd, the owner of the land, for RM1.14bil.
MRCB will own the remaining 20% stake in Bukit Jalil Sentral through its 85%-owned subsidiary Rukun Juang Sdn Bhd.
The rights issue entails the issuance of some 2.86 billion renounceable rights shares together with 571.34 million free detachable warrants.
Shareholders are entitled to one rights share on the basis of one MRCB share held and one free warrant for every five rights shares subscribed on the entitlement date.
The exercise would see its share base double to 4.35 billion shares from its existing capital base of 2.18 billion shares.
MRCB has said that after the rights exercise, the company expects RM46.69mil from interest savings, and its gearing is expected to reduce to 0.01 times from 0.73 times.
The capital-raising exercise is unexpected since the company had completed a share placement.
More than a year ago, in order to be a bumiputra company, MRCB undertook a placement of 357.2 million shares, or about 20% of its capital, to relevant bumiputra institutions.
MRCB raised about RM408.1mil from the placement exercise, which was done in three phases.