Highlights
Private placement of up to 10% of Jadi's paid-up share capital
JADI IMAGING is proposing a private placement of up to 10% of the company's paid-up share capital, or 61.5mil shares. The issue price is fixed at RM0.20, which represents a premium of approximately 11% to the 5-days volume-weighted average market price of Jadi's shares up to 9 July 2010. Once the exercise is completed, the company's paid-up share capital will increase by 10%, from 614.62mil to 676.08mil.

Proceeds utilisation
Assuming Jadi issues up to 10% placement shares at RM0.20 per share, this exercise is expected to raise RM12.29mil for working capital purposes (RM12.09mil) and corporate proposal expenses (RM0.2mil).

Positive on the proposal
Overall, we view this proposal positively as the proceeds will be utilised for working capital purposes where it is expected to contribute positively to the future earnings of the company. Besides that, this fund raising option enables Jadi to raise funds without incurring interest cost as compared to bank borrowings. Going forward, we expect the company's prospect to remain positive on the back of a sustainable rebound in demand. According to the company, an additional monochrome toner line is scheduled to be fully installed in third quarter this year, which is in line with the company's ongoing efforts to increase its productivity and efficiency.

Valuation and recommendation
Maintain Buy with an unchanged TP of RM0.23
We value the stock at RM0.23 per share, which is derived from its 3-years average PER(adjusted) of 11.09x and forecasted FY10 EPS of 2.06 sen.

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