KUALA LUMPUR – Zecon Berhad has proposed to raise capital via a rights issue to address its current funding requirements to meet its short term obligations and liabilities as well as strengthen its financial position.
The exercise could raise proceeds of between RM19.4 million (minimum scenario) to as high as RM46.1 million (maximum scenario) depending on the response of its shareholders.
Under the plan, the Sarawak-based construction and property firm plans to make a renounceable rights issue of up to 576.4 million of irredeemable convertible preference shares (ICPS) at an issue price of RM0.08 each and a conversion rate of RM0.16.
Under the corporate exercise, each shareholder who already owns one Zecon share will receive four ICPS shares. Shareholders who opt to subscribe to the ICPS will provide entitled shareholders with the opportunity to further increase their equity participation in the firm.
The entitlement date will be determined later. As the ICPS will be listed and traded on the main market of Bursa Securities, depending on the future performance of the group, shareholders may be able to benefit from future capital appreciation of the ICPS.
Zecon said the rights issue will raise total gross proceeds of RM46.1 million (maximum scenario) or RM19.4 million (minimum scenario). The firm said for future viable investments, it will spend RM3 million (maximum scenario) or RM1 million (minimum scenario) within the next 12 months.
A total of RM26.2 million will be spent on working capital (maximum scenario) or RM3.4 million (minimum scenario) within the next 6 months. Similarly, RM5.4 million will be spent on the partial repayment of bank borrowings (maximum scenario) or RM3.6 million (minimum scenario) within the next 3 months while another RM700,000 will be spent for listing expenses.
The rights issue of the ICPS augurs well for the company as it would further stimulate cash flow which in turn would further boost Zecon’s net profit. To recap, Zecon’s net profit for the nine months ended March soared despite facing hiccups brought about by the movement control order.
Zecon’s net profit surged 59.7% to RM9.15 million in its third quarter ended March 31 from RM5.73 million in the same comparable quarter a year ago mainly attributed by the Hospital Kanak-Kanak Universiti Kebangsaan Malaysia and the Pan Borneo projects.
Revenue for the quarter stood at RM143.1 million, a 26.9% increase from RM112.8 million previously. For the nine-month period ended March 31, 2020 the group registered a net profit of RM43.18 million compared with RM8.76 million net loss reported in the corresponding period of the previous year.
The company had also proposed the establishment of an employees’ share option scheme of up to 15% of total number of issued shares of Zecon to recognise and reward eligible persons.
The ESOS is also aimed at motivating eligible staff to improve performance through greater productivity as well as to inculcate a greater sense of belonging and dedication as the eligible persons are given the opportunity to own equity in the company. The company had also proposed amendments to the constitution of the company to facilitate the proposed rights issue of the ICPS.