CEO Morning Brief

Jakel to Surface as New Major Shareholder of Cypark — Sources

Publish date: Tue, 03 Jan 2023, 10:23 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Jan 3): Jakel Group is expected to surface as the single largest shareholder in renewable energy company Cypark Resources Bhd, according to sources.

A market source told The Edge that Jakel’s investment arm Jakel Capital could be taking up the whole block of Cypark’s private placement exercise, involving 30% of the total number of issued shares.

Another source, however, said Jakel Group will only be subscribing to half of the private placement shares — representing a 15% stake of the company — while the remaining half block to be taken up by another friendly party.

“The capital injection by Jakel will provide a lifeline to Cypark,” the source said.

At press time, the representative of Jakel and Cypark founding CEO Datuk Daud Ahmad have yet to respond to The Edge’s queries.

Last week, Cypark fixed the issue price of its private placement exercise at 38 sen apiece to raise about RM68 million, which is lower than what it had planned earlier.

The placement comprises up to 178.94 million new shares, representing up to 30% of the group's issued shares.

Aside from the placement, Cypark has also issued 49.89 million new shares via an Employees' Share Option Scheme (ESOS) at 38 sen a share. According to a filing with Bursa Malaysia on Dec 29, Daud had subscribed to the bulk of the ESOS at 40 million shares, which is equivalent to RM15.2 million of investment. The remaining 9.89 million shares were subscribed by the company’s directors including Tan Sri Razali Ismail. The ESOS exercise will see another RM18.95 million injected into the company.

Following the completion of the exercise, Jakel is expected to own an about 23% stake in Cypark.

On Tuesday, shares in Cypark closed at 52 sen per share, giving it a market capitalisation of RM306.20 million.

On the first day of trading in 2023, its share price surged as much as 17% to 54 sen per share before closing the day at 52 sen.

In less than one week, Cypark’s share price spiked more than 35%.

At the last trading price of 52 sen, Jakel is buying Cypark shares at a 27% discount to the market.

In a filing with Bursa Malaysia on December 28, Cypark said the issue price of its placement represents a discount of almost 8% to the volume-weighted average price of the units for the five market days up to and including Dec 27 of 41.27 sen apiece.

The current single largest shareholder of Cypark is Chung Chee Yang, who first emerged in the company last August when he acquired 30 million shares of Cypark via the open market, which gave him a 5.095% stake.

He then raised his stake via a series of open market acquisitions. By Sept 15, his shareholding had gone up to 7.93%, versus Daud's 6.77% stake. By end-November, he had 12.48% stake in Cypark

Cypark's third largest shareholder is Amanah Saham Nasional Bhd, which holds 6.3% via Amanah Saham Bumiputera and Amanah Saham Malaysia 3.

Jakel group, which is in the business of textile trading and property development, is no stranger in the local stock market.

In May 2021, Jakel group managing director Datuk Seri Mohamed Faroz Mohamed Jakel became a shareholder in ACE Market-listed technology company Sedania Innovator Bhd.

He emerged as a substantial shareholder in Sedania after subscribing to 43.53 million shares in the company’s private placement exercise, giving him a 12.55% stake.

It is worth noting that Jakel suffered two fire outbreaks over the past few days. A fire almost destroyed Wisma Jakel in Shah Alam on Jan 1. On early Tuesday (Jan 3), a second fire broke out at the curtain store room on the third floor of Wisma Jakel’s premises.

Jakel's involvement in Cypark will be an interesting one considering the latter’s diminishing profitability and increasing debts.

For the financial year ended October 31, 2022, Cypark’s net profit dropped 35% to RM48.7 million from RM75.42 million a year ago, on the back of a 22% decline in revenue to RM246.89 million compared to RM315.33 million previously.

As of October 31, Cypark’s borrowings stood at RM1.5 billion with cash and cash equivalent of RM181.1 million.

For the upcoming private placement, Cypark is eying to raise RM68 million, which is lower than what the company’s planned.

In a filing on Nov 8, Cypark had indicated that the group was aiming to raise between RM72.43 million and RM73.36 million from the placement.

The bulk of proceeds from the cash call has been earmarked for working capital for the development of the Large-Scale Solar 2 (LSS2) floating solar photovoltaic projects at Danau Tok Uban in Kelantan.

It also plans to allocate about RM22 million of the proceeds of about RM22.87 million as working capital for the solid waste modular advanced recovery and treatment waste-to-energy (SMART WTE) plant at Ladang Tanah Merah in Negeri Sembilan.

The two projects have been behind schedule for a while. The initial targeted commercial operation date (COD) for the floating solar plant project was in December 2021. It was then delayed to May, subsequently to September, and is now slated for May 2023.

Meanwhile, the waste-to-energy project had also missed its latest targeted COD three months back in September.

The proposed placement is expected to be completed in the first quarter of 2023.

The last private placement exercise undertaken by Cypark was in December 2021, from which the company raised RM97 million gross proceeds, involving the issuance of 20% of the total number of issued shares, for the development cost of the solar power plant facility and partial repayment of bank borrowings.

Source: TheEdge - 3 Jan 2023

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