KUALA LUMPUR (May 24): Johor-based printed circuit board producer PNE PCB Bhd has proposed a renounceable rights issue to raise up to RM45.37 million cash.

The fresh capital is meant for upgrading its production facility, installing a new product manufacturing line, and acquisition of related business or assets.

PNE PCB plans to issue up to 907.33 million of irredeemable convertible preference shares, which will be sweetened with 75.61 million free detachable warrants on the basis of 12 rights shares with one free warrant for two existing shares, according to a filing to Bursa Malaysia this evening.

"The board, having considered the current and prospective financial position, needs and capacity of the group, and after careful deliberation and taking into consideration the rationale and all other aspects, is of the opinion that the proposals are in the best interests of the company," PNE PCB said.

According to PNE PCB, the bulk of the proceeds from the cash call proposal will be used to upgrade its manufacturing facilities located in Tebrau, Johor, and Dong Guan City, China.

PNE PCB's two facilities, which are on average more than 12 years old, are currently running at a utilisation rate of 60%.

"As the machineries and equipment of the company are old, the efficiency and accuracy of the production capabilities are no longer at its optimum level," PNE PCB said.

"Pursuant to the upgrade of the production lines, the company expects overall labour costs to be reduced by up to 3% and wastages to be reduced by 1%," it further said, while noting that the upgrade will also reduce the machine downtime while at the same time produce up to 10% more goods than its existing output levels within the same working hours' constraints.

"This extra capacity will allow the company to cater for the increase in demand, when the need arises," it added.

PNE PCB also noted that the upgrade of its facilities is suited for the newer generation of electronics products, which involves slightly more complicated functions.

"Some of the electronics products include radio systems, television remote controls, routers, air-conditioners and refrigerators," the firm said, adding that the selling price of new printed circuit boards will be about three to five times higher than the selling price of its existing products.

On potential investment in new business or assets, PNE PCB said it will earmark proceeds of up to RM7.6 million to finance any potential acquisition or investment that will be similar or complementary to its current business.

"These potential acquisitions or investments may include businesses within PNE PCB's core business but are not limited to businesses within the same value chain, and such other assets which the board deems beneficial and are complementary to the group's business expansion," it added.

Separately, PNE PCB saw its net profit in the second quarter ended March 31, 2017 doubled to RM215,000 from RM107,000 a year ago, on the back of 5.5% growth in revenue to RM23.51 million from RM22.29 million previously, thanks to expansion of its client base.

For the cumulative six months ended March 31, 2017, PNE PCB's net profit jumped several folds to RM1.89 million from RM200,000 a year ago, while revenue jumped 21% to RM51.44 million from RM42.33 million previously.

On outlook, PNE PCB said, "It is expected that for the current financial year [ending] Sept 30, 2017, the group will be able to achieve marginal profit through constant improvement on the costing and production efficiency."

Shares in PNE PCB rose 2.5 sen or 4.71% to close at 55.5 sen, for a market capitalisation of RM72.98 million.