KUCHING: Power and telecommunication cables manufacturer Sarawak Cable Bhd (SCB) is expected to raise some RM53.9mil from a proposed private placement to par down its borrowings.
The company said the proposal would involve the issuance of up to 31.7 million new shares representing about 10% of its issued and paid-up capital at an indicative price of RM1.70 per placement share.
“Subject to prevailing market conditions, the proposal may be implemented in multiple tranches within a period of six months or any extended period as may be approved by Bursa Securities,” SCB said in a filing with Bursa Malaysia.
The company said RM53.4mil from the proceeds of the private placement would be used to repay the group’s borrowings which stood at RM593mil as of Dec 31, 2015. The remaining RM500,000 would go to paying the expenses of the corporate exercise.
The repayment of the borrowings is expected to result in interest cost saving of RM2.96mil per annum, and reduce the group’s gearings to 1.24 times from 1.64 times.
SCB’s gearings surged after the company acquired Leader Cable Industry Bhd and Universal Cable (M) Bhd for RM210mil in December 2014.
The acquisitions boosted the group’s manufacturing capacity and capability, making SCB as Malaysia’s largest integrated manufacturer of power cables and conductors. SCB is the country’s sole producer of 275kV underground high-voltage power cables. The group owns eight manufacturing plants in several states in peninsular Malaysia and Sarawak.
Post-acquisitions, SCB said it had in the past 12 months focussed on integration and streamlining of its various manufacturing operations and facilities.
“This had improved the group’s manufacturing efficiency as well as enhancement of products quality which provide the group with a strong base to participate in business opportunities both locally and regionally that generate attractive profit margin and/or provide recurring incomes,” it added.
SCB said the proposed private placement would enable the group to raise funds to strengthen its capital structure and reduce its dependency on bank borrowings, thereby allowing the group to better manage its gearing level and add flexibility to its cash flow management to fund its operations for future expansion when opportunities arise.
In a recent report, AmInvestment Bank said it viewed the proposed private placement positively as it would reduce SCB group’s net gearing and improve cash flow.
“We continue to like SCB as the leading integrated transmission line and power cable player in Malaysia,” the research house said, adding that the soon commencement in the commercial operation of SCB’s 78%-owned mini hydro power plant in Sumatra would provide steady recurring income for the company.