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Author: PublicInvest   |   Latest post: Fri, 20 Sep 2019, 10:03 AM

 

Eastern & Oriental Berhad - Equity Fund Raising Up to RM550m

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E&O Berhad (E&O) has proposed to raise funds via a private placement of up to 10% of the issued shares, and a renounceable rights issue with free detachable warrants with both exercise prices to be determined later. This comes as a negative surprise as we had believed earlier that the Group would raise funds by disposing non-strategic assets and/or get more strategic partners for its Sri Tanjung Pinang Phase 2 development. Based on illustrative issue price of RM1.12, our RNAV could be diluted from c.RM4.00 per share to RM2.80 to RM3.30. All told, we maintain our Neutral but with TP reduced to RM1.00 (from RM1.30 previously), pegged at higher c.75% discount to RNAV.

  • Fund raising of up to RM550m. We believe that the main reason of the fund raising is both for repayment of borrowings and property development business which is mainly for STP Phase 2 (STP2) project. To recap, STP2 is the Group’s key project which has development period over 15 to 20 years. The first phase (Phase 2A-253 acres) of the mammoth development is on track to be completed by late-2019. We understand that the maiden launch of a condominium project at STP2 is planned by 1H2019.
  • Mechanics of equity fund raising. The proposed private placement represents up to 10% of the issued share capital totaling 1.31bn shares while the proposed rights issue with warrants is on an entitlement basis of one rights stock for every four E&O stocks held and one warrant for every two rights stocks subscribed. Assuming all the new shares are priced at illustrative issue price of RM1.12, the Group is expected to raise between RM250m to RM550m of which proceeds will be used for repayment of borrowings, property development and/or reclamation, general working capital and expenses of the proposed fund raising. Net gearing which stood at 0.6x, is estimated to be pared down to 0.15x to 0.39x depending of the amount raised.

Source: PublicInvest Research - 12 Feb 2019

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Labels: E&O

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Chart Stock Name Last Change Volume 
E&O 0.705 -0.025 (3.42%) 1,383,900 

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