MKH proposed to undertake a renounceable rights issue on the basis of one rights share for every 10 existing MKH shares held and two bonus shares for every one rights share subscribed. The proposed exercise is expected to be completed by 3QFY17.

Based on the indicative issue price of RM1.89/rights share (20.3% discount to theoretical ex-all price), the proposed rights issue will raise up to RM85.8m which will be mainly utilised for its property development business: - 44% for infrastructure and property development - 23% for payment of land owners’ entitlements - 25% for construction of KTM Komuter station at Kajang 2 township

We are neutral on the proposed exercise as EPS dilution is expected to be minimal at 9% for FY18-19, while net gearing will likely improve to 0.3x (from 0.4x as at Sep-16). We make no changes to our earnings projection for now as the issue price of the rights shares has yet to be fixed. We maintain our BUY rating and RM3.40 TP.

Source: Alliance Research - 7 Dec 2016