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Malaysia Daily Bulletin – 08/04/13

Sunway Aims To Raise RM1bil From Issue
Sunway has proposed to raise up to RM1.01 billion from a rights issue of up to 594.55 million rights shares at RM1.70 a share. In a filling to local burse, the company said that the proposed issue would be on the basis of one rights share for every three shares held on an entitlement date to be determined later. Out of the total funding of RM1.01 billion, Sunway plans to allocate RM670 million as capital expenditure, RM300 million to repay borrowings and RM40.1 million for general working capital purposes. “The proposed rights issue would enable Sunway to raise funds to part finance its capital expenditure including for the development of its investment properties, land bank acquisitions and purchase of property, plant and equipment, repayment of existing borrowings and for its general working capital requirements which are expected to contribute positively to the future profitability of the Sunway group,” said the company.

Significance: Sunway believes the proposal is the most appropriate avenue of fund raising for the group, without incurring interest cost as well as to minimise any potential cash outflow in respect of interest servicing, compared with bank borrowings. It also expects the proposed rights issue to reduce the gearing level to strengthen its balance sheet, as well as enhance the liquidity of its shares on the local equity market.

Tekala Corporation’s Subsidiary Sells Its Losing Business
Tekala Corporation’s wholly owned subsidiary, Offshore Constructor Ltd (OCL)has entered into an agreement with National Marine Dredging Company for the disposal of a 300-men accommodation workbarge known as “Offshore Safeena” for a total of US$29.3 million (about RM90 million). In a filing with Bursa Malaysia on last Friday, Tekala said the disposal was a good option to divest the poorly performing operation of OCL and to recoup part of its cost of investment in the vessel. The vessel’s chartering activities have yet to generate sufficient cashflow to service its quarterly loan installments and thus have put a strain on the group’s liquidity, it added. Tekala said upon completion of the proposed disposal, the company would be able to refocus on timber business, which is its core business. OCL had recorded a loss after taxation of RM54.9 million for the financial year ended 31 March 2012, mainly due to the impairment loss on the vessel amounting to RM57.6 million. The proposed disposal is expected to be completed by the second half of 2013.

Significance: The disposal will not have any effect on the share capital and substantial shareholders’ shareholdings in the Tekala Group as it does not involve any issuance of new Tekala shares. However, it is expected to contribute positively to the future earnings of the Tekala Group for the financial year ending 31 March 2014.

PETRONAS Ups Offer Price
In a bid to take the shipping giant MISC private, Petroliam Nasional (PETRONAS) increased its offer price by 20 sen to RM5.50 per share and extended the offer acceptance date to 19 April. The revised offer reflects a new premium of 22.5 percent from the 18 percent before the revision on the last closing price prior to the takeover notice on 30 Jan. The previous offer price which was at RM5.30 received a low acceptance of only 0.74 percent as of 15 March. Nevertheless, CIMB Investment said the level of acceptance had increased 7.58 percent as of last Friday, bringing PETRONAS’ total stake in the company to 70.25 percent. PETRONAS needs to breach the 90 percent level to make the offer unconditional. According to one industry analyst, the revised offer price is still below the independent adviser’s valuation price. Looking at the oil price and demand, MISC’s weak petroleum tanker segment is expected to be lifted by increasing global energy demand.

Significance: According to independent adviser AmInvestment Bank, the previous offer was unfair, as it was priced at a significant discount to MISC’s sum-of-parts valuation (SOPV), but considered it reasonable anyway due to a weak shipping outlook that may persist and the absence of a competing bid. It had, hence, recommended minorities to accept the offer.