ROOM FOR GROWTH: The cash raised will be used to fund Phase 2 of the expansion of Pantech’s stainless steel plant, which will focus on manufacturing fittings, flanges and bigger diameter pipes.
KUCHING: Pantech Group Holdings Bhd (Pantech) has proposed a bonus issue, rights issue and free warrants in order to raise funds for the second phase of its stainless steel division.
According to a recent research report by OSK Research Sdn Bhd (OSK Research), the group announced a one-for-five bonus issue and a two-for-one seven per cent RM0.10 irredeemable convertible unsecured loan stock (ICULS) together with free detachable warrants on the basis of one free warrant for every 10 ICULS.
These exercises would enlarge the group’s share base and would have an immediate dilutive impact on the company’s earnings per share (EPS).
Assuming all of the ICULS were subscribed and warrants exercised, the research house expected Pantech to raise some RM120 million in cash, thereby reducing its gearing from 0.51 times to 0.39 times.
In addition, the cash raised would be used to fund Phase 2 of the expansion of its stainless steel plant, which would focus on manufacturing fittings, flanges and bigger diameter pipes.
Given that this phase of expansion would only be operational come 2015, the research house had only imputed the expansion from Phase 1 into its model, thereby adjusting its numbers for 2012 upwards by 13 per cent to RM63.6 million.
Despite the earnings expansion from Phase 1 and Phase 2 over the long term, OSK Research believed that a short-term immediate dilutive impact on the company’s earnings would be imminent before any contributions from the stainless steel arm could kick in.
Taking all of this into account, the research firm pegged Pantech at RM0.98 per share while maintaining a neutral recommendation for the group.
by Borneo Post
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