CEO Morning Brief

Hiap Teck to Spend RM53.2 Mil Under Steel-making JV's Cash Call

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Publish date: Thu, 07 Dec 2023, 09:14 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Dec 6): Hiap Teck Ventures Bhd will fork out RM53.24 million under its steel manufacturing joint-venture (JV)’s RM195 million rights issue, which is to fund the JV’s capital expenditure, in particular a hot rolling mill.

In a bourse filing on Wednesday, Hiap Teck said it will subscribe to 54.6 million new shares in Eastern Steel Sdn Bhd (ESSB) at 97.5 sen apiece under the JV’s rights issue of 200 million shares. Hiap Teck will fund the subscription amount via internally generated funds and/or external borrowings.

A share subscription agreement has been inked between Hiap Teck ― which owns 27.3% in the ESSB ― and the other JV partners ― Shanxi Jianlong Industry Co Ltd and Chinaco Investment Pte Ltd, who own 68.8% and 3.9% stakes in the JV respectively ― as well as Jianlong Holdings Sdn Bhd (JHSB).

JHSB, Shanxi’s sister company by way of sharing Beijing Jianlong Heavy Industry Group Co Ltd as a parent, is to subscribe to Shanxi’s entitlement of 137.6 million shares for RM134.16 million.

The Eastern Steel Sdn Bhd branch at Kemaman, Terengganu, as seen on Nov 8, 2023. (The Edge filepix by Patrick Goh)

Meanwhile, Chinaco is to subscribe to 7.8 million shares for RM7.61 million.

Hiap Teck said the proposed share subscription is expected to be completed by end-December.

Post share subscription, the shareholders will maintain their stakes in the JV: Hiap Teck with a 27.3% stake, Shanxi and JHSB with 63.3% and 5.5% respectively (an aggregate of 68.8%), and Chinaco with 3.9%.

The RM200 million cash raised from the exercise will be used by ESSB for capital expenditure, including the planned hot rolling mill, as well as working capital requirements.

ESSB is a steel product manufacturer with a production capacity of 2.7 million metric tonnes (MT) per annum of steel slabs and billets ― raised from 700,000 MT previously, with the addition of a new 1,380 m3 blast furnace in August.

“ESSB is in the [process] of constructing a new 1,450 mm hot rolling mill, which will have an annual rolling capacity of 2.58 million MT of hot rolled coil (HRC) upon its targeted completion in September 2024,” it added.

It was previously reported that this comes under ESSB’s RM5.5 billion Phase 2 expansion, where RM4 billion has been invested into the new blast furnace, while another RM1.5 billion is to go toward the hot rolling mill.

Shares in Hiap Teck ended unchanged at 43.5 sen on Wednesday, giving the group a market capitalisation of RM751.81 million.

Read also:
Cover Story: Steel going strong
Hiap Teck's Eastern Steel to shift product focus to hot rolled coils next year

Source: TheEdge - 7 Dec 2023

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