Perisai has announced that it would be going by way of a call option to issue new shares. Maintain NEUTRAL with a MYR0.31 TP (6% downside). Instead of a plain vanilla placement of new shares, Perisai is expected to issue 119m call options with the right to convert to 119m new shares. The minimum amount of cash to be raised by this exercise is MYR29.75m, thus allowing it to have a bit of a breathing space.

Salient details. Perisai Petroleum Teknologi (Perisai) has announced that it is going aead with its plans to issue new shares, albeit with a bit of a twist. Instead of a straight forward private placement, the company has opted to issue shares via a call option. The exercise would involvethe issuance of 119m call options, which is exercisable on a 1-for-1 basis for the new Perisai shares over a period of 18 months. The exercise price of the call option would be at a 10% discount to the volume weighted average price (VWAP) over five preceding consecutive market days.

Floor price and Bursa. Bursa has approved the exercise for a period of six months. Perisai is expected to apply for an extension to the call options exercise period closer to the date of expiry for up to 18 months. We also understand that the exercise price can never be lower than the floor price, which is set at MYR0.25. Assuming that all the options are converted to shares, the minimum amount of money which would be raised by Perisai through the exercise ought to be MYR29.75m.

Maintain NEUTRAL with TP of MYR0.31, at a 70% discount to 1x FY16F P/BV. As the exercise period would be done initially over a six months period, we make no changes to our earnings and TP at this juncture. With the potential fresh cash injection of MYR29.75m into the company, this may allow Perisai to have a bit more breathing room in terms of its financial capabilities. The cash raised is expected to be used to pare down its borrowings as well as for working capital. Interestingly, our fully diluted TP of MYR0.25, assuming all the call options are converted to new shares, is the same as the floor price of the exercise.