Abric proposes capital reduction and rights issue of warrants

Security seal maker Abric Bhd has proposed a rights issue of new warrants after a capital reduction to wipe out its accumulated losses and raise fresh working capital.

In an announcement to Bursa Malaysia yesterday, Abric said the proposed capital reduction would trim the par value of each share to 30 sen from RM1. This will remove the company’s accumulated losses of RM86.4 million from its balance sheet.

Abric, which has sunk into losses since the financial year ended Dec 31, 2005 (FY2005), has also proposed a rights issue of new warrants on the basis of one warrant for every two existing shares held after the capital reduction.

The issue price of the warrants will be three sen and the exercise price is pegged at 30 sen. Abric’s share price finished at 23 sen yesterday, up 0.5 sen with 1.33 million shares traded, after the stock was suspended for an hour in the morning session.

For the first half ended June 30, Abric returned to the black with a net profit of RM3 million on revenue of RM31.3 million compared with a net loss of RM839,000 on revenue of RM25.5 million for the same period in 2009.

Abric incurred a net loss of RM4.14 million on revenue of RM53.8 million for FY2009. Loss per share shrank to 4.18 sen from 22.36 sen in FY2008.

Other proposals announced yesterday were the proposed termination of the company’s existing employees’ share option scheme (ESOS) and to replace it with a new scheme of up to 15% of outstanding issued and paid-up capital.

The exercise price of the proposed new ESOS is based on the higher of the five-day volume-weighted average price (VWAP) of Abric’s shares immediately preceding the date the option is offered (with a discount that does no exceed 10% of the VWAP) or the par value of 30 sen per share.

The rationale for this is that the outstanding existing ESOS options with exercise price of RM1 have been out of the money since December 2003.

The company also proposes to reduce its authorised share capital to RM150 million comprising 500 million ordinary shares of 30 sen each from RM500 million comprising 500 million ordinary shares of RM1 each. It proposes to amend its memorandum and articles of association to facilitate this.




by Loong Tse Min
This article appeared in The Edge Financial Daily, August 10, 2010.