How could a right issue resolves a 1 billion debt due in 12 months when its market cap is valued at only 380 million? Unless it raise 3 times of its market cap, then its own management, mac’s family and executives, whose own about 25% of total shareholding needs to come out with 280 million from their personal pockets to avoid their shares’ dilution.
Of course 3 times is an extreme measure assuming no other source of fund. Anyway, when everyone in the management knows the company is going under, convincing them to go deeper with extra personal capital is simply impossible.
Anyone familiar with right issue or any other issue including bond knows that most, if not all, of issues are sold to big investors before they are offered to the public, perhaps left less than 10% of raised capital. In this particular case that Muhibbah’s substantial investors, excluding management, such as KWSP and Tabung Haji have disposed their shareholding since May 2020, so it is unlikely to expect any other big investor to fill the gap, even if the management team members are willing to dilute their own shares by not pouring personal capital into a sinking ship.
SCA like any other airports in the World is suffering from pandemic and will face intense competition from new Chinese-owned Cambodian Airports, so it is unlikely for SCA to pay any dividend to shareholders in coming years. Moreover, Muhibbah being minority shareholder, even with 30%, in SCA is unable to exert influence on SCA’s dividend policy. It is obvious when it needs to pay 40-50 million interest annually for years because of its heavy debt, but leaving the so called 400 million with SCA for decades for 0 interest. That raised the questions of management’s competency in converting paper profit into cash and plausibility of its revenue recognition, perhaps yet another accounting scandal to be unveiled.
certifiedanalyst11, what about muhibah's long term assets? would they be able to sell off their long term assets in order to help resolve it's debt problem?
I believe no one should buy the right options. This is a desperate measure of saving the company from going under. 50 cent a share is not 31% discount from market value as advertised, but it is the true value after detailed scrutinization by RHB investment bank. In their latest financial report, asset per share is RM2.30, but why selling only 50 cent a share? There could be only one reason if the management is equipped with reasonable mind, that is no banks willing to finance the 1 billion ringgit debt due in 12 months anymore. Why? because most of the accounting profits recognized as account receivables are questionable, which is unable to translate into real cash flow to settle the debts.
On paper, assets are largely greater than liabilities, but in actual assessment, it's only 20% of reported. This implies that 80% are overstated? that the debts are derived from loss making deals. Remember, only realisable receivable is true profit. Untranslatable one is all paper profit and subject to impairment, which is in the real term - business loss.
So now, the management asks the shareholders to chip in more than half of their investment in the company if not your share value will further drop to 30 cent (from 60 cent). The logic is that they are issuing more than half of current outstanding shares. without paying for their bad decision in business - loss making deals that now making 1 billion debt-, your shares will dilute by more than half. Dilution simply means loss of value, same as your shares drop to 30 cent from current 60 cent. Dont you agree this is desperate or threatening? The sharp drop when this is announced is not panic sale bur rather adjustment to reality given above analysis. So the further 50% drop in value if you dont buy the option is not yet accounted for.
So some might ask how about the company prospect? 1) construction is hopeless. this is the sector that got the company into today's misery. All the loss making deals are now surfaced when the management has no more new project's invoices to refinance the debts.
2) marine is a failure. during pandemic, freight charges are at all time high, and shipping companies are ordering more vessel than ever. Yet, the company has not announced any new order for ship building.
3) cambodian airport is done. because the largest passengers to cambodia is chinese, when China government adopts zero covid policy, it is unlikely to see any passenger into cambodia at least 1 year after pandemic is over. Chinese government will not open borders that soon, so even one year window is very optimistic, in which case is 2024, assuming omicron is the last variant, i highly doubt so.
4) crane sector is the only reason why the management is gamble with 25million for issuing this options. Imagine if the company is bankrupt, and debt collectors taking over all Muhibbah's assets, including 60% of favelle favco's shares. Then, the management will loss control of both companies. That's the only reason why the management is trying to save the company by self funding 25m to pay the debts stemming from loss making projects.
As for you, what do you gain by preserving your shareholding proportion of a sinking ship?
this is a lousy counter, I foresee that after the rights issue, this counter will drop below 50 cts. I belief the company has a lot of bed debts or impairment losses, after contra off with this impairment losses, its NTA may drop below 1.00 and no more RM2.30. Money received from rights issue may be utilized for debts repayment. This counter has no hope at all, I am not confident in it and do not wish to preserve this counter anymore, I force myself to dispose of all my shares at big losses last week and today. my cost per share is about RM1.10. With the proceeds received, i look for better profitable counter with annual dividends. This is a sinking ship, if I would escape now, I will die of suffocation in the ship. The above is my personal opinion, you don't follow me if you are confident in this counter. Happy Chinese New Year and happy trading as well to all my friends who are still in the market.
I belief that during the Ex date on 28 March for this counter, it will fall below the rights issues price at 50 cts. To avoid double losses, I better clear my shares and run away for safety.
Ah Meng, you better sell your shares now, this is not a good company, good management will never ask money from shareholders by calling for rights issues. after the ex date, the market price will drop below 50 cts. I don,t see any good prospect for this counter, buyers have disappeared from the market, Ah Meng, you better sell it and shift over to other counters of which they made profit plus distribution of divividend, you consider my advice, happy trading to you,
hcthey I bet you a cup of coffee that after Ex-date Muhibah will stand above 50 cents or even higher than 60 cents. Can you image what will happen if Muhibah trade below 50 cents after ex-date ? This mean the current Muhibah share holder wont apply for right issue share end up the major share holder will under write all unsubsribe share. Indirectly this share will be push up by someone until completed right issue process.
Hi Chung, not necessarily got anybody to push up d mother shares to ensure over subscription, as I observed many RI were poorly under- subscribed lately.
It is very common nowadays, as d timing for d cash call excercise is not good.....
well, typical right issue pattern is big drop when announce right issue, but rebound kuat after right issue done. Mark my word ,lets see the price at the end of april.
I sold all my shares plus OR at moderate losses, with the proceeds I shifted over to Ruberex counter, I recover part of my losses in Muhibah. Eventually my losses drops to the minimal, I don't feel so sore in my heart. My friend Ah Meng did the same thing. Currently I am still holding small number of Ruberex shares, hopefully it will go up further. Today the highest price done is 62.5 cts.
Muhibbah has been actively buying their darling Favco shares in open market since end 21, increasing their stake from 58 to 63% now, 5% of favco mart cap around 30mil. Spending quite a bit there expecting crane usage recovery . Instead, they do rights issue to pay off interest bearing debts, is a bit of a mystery to me.
Just a week ago cash called to pay down debt, now propose share buy back! Money from? What is the logic there? Obviously someone pressed down share price for cheap tickets.. dirty jobs
yeah so smart that even before getting the new shares, stock price has dropped on par with right issue price, earning zero margin or loss. expect further drop when stock supply increased by 50% on tomorrow. Unfortunately those who exercised thinking to make a quick buck will loss money for their own greed.
why sudden drop? because the company was repurchasing the stocks to keep the price higher than 50 cent during the exercise period, hence the notice for recent share repurchase.
now that people have transferred their hard earned money to the sinking ship, the management has stopped repurchasing to keep the share above 50 cent.
i bet no one can win a lawsuit for own ignorance. so stay poor uptrending, you earned it.
New to Muhibbah, but subscribed to RI. Just want to point out that as announced in Bursa the directors forked out many millions to subscribe the RI. I will just hold.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Jamalko
55 posts
Posted by Jamalko > 2022-01-15 12:16 | Report Abuse
Next monday will buy a lot too cheap now