Let's begin with a brief overview of the company's principal activities for those unfamiliar with Harn Len Corporation:
The Harn Len Group's principal activities include the cultivation of oil palm plantations, the operation of palm oil mills, the provision of plantation development services, palm oil estate and plantation management, investment holding, real property investment, and the operation of a food and beverage outlet.
As of 30 June 2021, the Harn Len Group has 17,091 hectares of oil palm plantations, most of which are located in Pahang and Sarawak. Only 15% of the palms are immature, whereas 85% are mature. It owns a 60-metric-ton-per-hour FFB oil mill in Sarawak.
Harn Len also owns six (6) units of shophouses, three (3) units of manufacturing buildings, and two (2) pieces of unoccupied land in the commercial business centre of Johor Bahru city and within the Iskandar Development Region of Johor, in addition to the 25-story office skyscraper known as Johor Tower. In Kuching, Sarawak, the company also owns a seven-story office and residential complex.
And this would be the company's current share structure and bonus issuance (according to lowest and maximum scenarios).
The company held 2,475,000 shares under the employee stock ownership plan, 34,643,255 unexercised warrants for 2019/2026, and 7,461,800 treasury shares as of the date indicated. In the event that shares are converted, the bonus issuance will be subject to the maximum scenario.
However, from an investor's perspective, your shares will not be diluted by the planned bonus issuance. Due to a larger share count, the EPS and NTAPS may vary, but your shareholding rights will not.
The company's adjusted share price or potential ex-bonus share price is RM0.5468 and RM0.7115 based on the lowest daily VWAMP for the past three months and five days, respectively.
While many other plantation stocks are retracing and remaining quiet, HARNLEN, in contrast to all of its competitors, is actively rewarding shareholders with its Bonus Issue proposal to issue 8 free bonus shares for every 5 ordinary shares held.
In contrast, HARNLEN had returned more than 176.60% compared to the mediocre performance of the plantation index as a whole, which was only 2.21 percent.
Let us take a closer look at the company's bonus issuance. (Extracted from the company's press release)
The Proposed Bonus Issue of Shares is intended to achieve the following: -
• compensate existing stockholders for their sustained support and commitment;
• permit shareholders to raise the number of shares held without incurring a monetary expense, but preserving the same proportion of equity stake;
• might increase the liquidity and marketability of HLCB shares; and
• The lower theoretical ex-bonus share prices compared to the existing HLCB Share prices prior to the Proposed Bonus Issue of Shares may present owners with an opportunity to purchase HLCB Shares at a lower price point.
The Proposed Bonus Issue of Shares is anticipated to be completed by the end of the fourth quarter of calendar year 2022, barring any unforeseen events and assuming all necessary permissions are received.
How would the market react to the bonus issuance proposal?
Why did HARNLEN choose to release a bonus issue while its peers remained silent?
I believe there must be something favourable in the company's future that prompted them to reward shareholders at this time.
It would be prudent to observe the performance of HARNLEN's stock price on Tuesday!
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Financial advice disclaimer: The information provided in this message is for general informational purposes only and should not be considered as financial advice.