KNM GROUP BHD
KLSE (MYR): KNM (7164)
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Last Price
0.06
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-0.005 (7.69%)
Day's Change
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864,700
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Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
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....
eSdM
207 posts
Posted by eSdM > 2014-01-28 17:22 | Report Abuse
3. RATIONALE FOR THE PROPOSALS
3.1. Proposed Par Value Reduction
As at 24 January 2014, being the market day prior to this announcement, the closing price of
KNM Share was RM0.565, which is at a discount of 43.5% to the existing par value of RM1.00
each in KNM share. The current market price of KNM shares is therefore not conducive for
KNM to embark on any fund raising exercise and/or corporate exercises involving issuance of
new shares. Accordingly, the Proposed Par Value Reduction will provide the Company with
greater flexibility to raise funds and to implement future corporate proposals which entail the
issuance of new shares.
This latest exercise by KNM is a big negative.
From the rationale above, it can be clearly seen that the intention of doing it is for KNM to have "....greater flexibility to raise funds and to implement future corporate proposals which entail the
issuance of new shares", which plainly put means KNM, at the moment, with its par value at RM 1 cannot do a rights issue as the price of rights issue cannot be lower than its par value of RM 1, as nobody will subscribe to its rights issue at RM 1 when the price now is just RM 0.545, even with some sweeteners such as bonus shares or free warrant thrown in, as such, it must reduce its par value.
But more importantly,
1. from the ".... to raise funds..... " it is shown, despite the recent loans it obtained, KNM is still short of fund and looks like it needed the fund urgently.
Everyone knows KNM has got this Borsig subsidiary which it has claimed is ready for listing, now, if KNM is in need of funds, wouldn't the best way to do it is to list Borsig??
BUT, KNM IS NOT DOING IT! WHY? IS THIS BECAUSE BORSIG IS IN FACT NO YET READY FOR LISTING?? THIS EXERCISE HAS SHOWN THAT BORSIG WILL NOT BE LISTED ANYTIME SOON!
2. Instead of working hard to generate profits to boast its share price to beyond RM 1 to meet its par value of RM 1, KNM has now proposed to reduce its par value to meet its pathetic profits.
IT SEEMS KNM IS NOT CONFIDENT THAT IT WILL BE ABLE TO IMPROVE ON ITS PROFITS IN THE FUTURE.
3. KNM's share capital is already huge, if there is further issuance of new shares under a rights issue and bonus issue, KNMs capital will be really huge.
COUPLE THIS HUGE CAPITAL BASE WITH THE PATHETIC PROFITS AS NOTED IN 2 ABOVE, THE RESULT WILL BE A HUGE DILUTION OF ITS EPS. YOU WILL BE SEEING EPS OF 0.0000001 SEN OR SMALLER. HOW IS THIS EPS GOING TO SUPPORT KNMs SHARE PRICE??
Based on 1, 2, 3, I have now turned negative on KNM as Borsig will not be listed anytime soon, its profits will not improve, and yes even most likely there will be some sweeteners such as bonus shares or free warrant thrown in if KNM were to have a rights issue, its profits will not be able to support its share price, which is precisely what is happening now.
HISTORY REPEATING ITSELF!