KUALA LUMPUR: The move by Bioalpha Holdings Bhd
major shareholders to subscribe to the health supplements maker’s latest rights issue is a positive one as it will ensure the rights shares will be fully subscribed.
CIMB Research on Thursday said the company’s major shareholders, William Hon and PNS, have given an undertaking to subscribe for their portion of the rights issue shares. “In addition, Hon and PNS have also undertaken to subscribe for 16% and 56%, respectively, of the allocated rights issue not subscribed by minority shareholders.
“This means, Hon and PNS have undertaken to subscribe for 100% of the proposed rights issue. We view this move positively as this ensures Bioalpha‘s proposed rights issue will be fully subscribed,’’ it added.
Yesterday, the company had proposed 1-for-5 rights issue (one rights share for every five shares owned) and in addition would give one free warrant for every rights share subscribed. The issued share base would rise to 800 million shares, or 934 million shares assuming warrant conversion. Based on the indicative RM0.21 rights issue price, the company would raise around RM28mil cash.
Assuming the rights issue is set at RM0.21, this is at 25% discount to the estimated ex-rights issue price, the research house said, which it view fair as shareholders would also get a free warrant for very rights share subscribed.
On a fully diluted basis, the issued share base would rise from 667 million to 934 million shares. Estimated 2017 earnings per share (EPS) dilution ex-rights issue is around 35%, it said, noting that the research house ex-rights target price (fully-diluted basis) would fall from RM0.52 to RM0.37.
CIMB said the proposed rights issue was a positive surprise as the proposed funds raised would be mainly used for planting 880 acres in Pasir Raja with herbs (RM10mil), and purchase of raw materials, packaging costs and working capital needs for new products (RM13.5mil).
Bioalpha is planning to launch new products in all markets (China, Indonesia and Malaysia) over the next few months.
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