LPI Capital Bhd proposes bonus issue, rights issue

KUCHING: LPI Capital Bhd (LPI Capital) has proposed a one-for-two bonus issue involving the issuance of up to 69.4 million shares and a one-for-10 rights issue of up to 13.9 million shares at RM7 per rights.

Source: OSK Research

According to OSK Research Sdn Bhd (OSK Research) in its recent research report, the group which is primarily involved in the underwriting of general insurance, investment holdings and financing leases recently announced this along with its annualised half year results.

The bonus issue, opined the research house, would be capitalised from its share premium account and would increase its share capital to RM222 million while the rights issue would help the group to meet its working capital needs which was valued at about RM97.1 million.

It added that the bonus shares were not entitled to the rights and its share base would increase by 60.1 per cent after the issues, which would result in higher liquidity.

A lower transitional 10 sen single tier interim dividend was declared to facilitate the bonus issue but the research house expected its dividend payout ratio to normalise over the course of the year, after the completion of the bonus and rights issue by the end of August this year.

Apart from that, the group continued to perform on a steady growth path with its revenue and net profit rising 12.2 per cent and 11.3 per cent year-on-year (y-o-y) respectively. Its performance was underpinned by a 42.8 per cent y-o-y surge in gross premium and a lower claims ratio of 47.3 per cent.

This was on top of its annualised earnings for the first half of the financial year 2010 (1HFY10) registering 10.5 per cent and 12.4 per cent below consensus and the research house’s full-year estimates respectively.

Nonetheless, the research firm deemed the results in line as the first half of the year is seasonally weaker, with 2H cumulative earnings typically contributing 54 per cent of full-year earnings.

The report continued to highlight gross premiums rising 13 per cent y-o-y largely due to an expansion in the cargo, hull, aviation and offshore segment that saw a 29.4 per cent increment.

With a lower claims ratio of 47.3 per cent versus a 51 per cent in the previous quarter, the group’s underwriting surplus surged 35.8 per cent quarter-on-quarter (q-o-q) and 42.8 per cent y-o-y.

The management expense ratio was kept at 17 per cent versus the industry average of 19.4 per cent. On the other hand, investment income growth was flat at zero per cent q-o-q and declined by 28.4 per cent y-o-y.

As such, the research house maintained a target price or RM17.30 per share for the group.

by Borneo Post