KUALA LUMPUR (Nov 11): Dolphin International Bhd, which was listed in June, has proposed a bonus issue of 55.5 million warrants on the basis of one free warrant for every four existing Dolphin shares.

In a filing with Bursa Malaysia today, the palm oil mill manufacturer said the exercise price for the five-year warrants will be determined and fixed by the board at a later date. In any case, the exercise price of the warrants will not be lower than the par value of Dolphin share of 20 sen.

For illustrative purposes, the warrants are assumed to be fixed at an indicative exercise price of 90 sen per warrant, which represents a premium of 10.47 sen or 13.16% to the five-day volume weighted average market price of Dolphin shares up to and including the last market day immediately preceding this announcement of 79.53 sen.

Each warrant shall entitle the holder to subscribe for one new Dolphin share at the exercise price.

The proposed bonus issue of warrants will not raise any funds. However, the proceeds from the exercise of the warrants will be utilised as working capital for its business operations' expenditure.

These expenses include salary, repayment of borrowings and creditors as well as general expenses, such as travelling, utilities, staff training and staff welfare.

However, the amount raised will depend on the warrants exercised.

The proceeds raised are expected to improve Dolphin's cash flow too.

The board is of the view that the proposed bonus issue of warrants is an appropriate avenue to reward its shareholders and allow them to benefit from any potential capital appreciation arising from the exercise of the warrants.

"The proceeds from the exercise of the warrants will further strengthen the capital base of the company and will enable the company to raise funds without incurring interest cost, as compared to bank borrowings," it said.

However, Dolphin's earnings per share will be diluted as a result of the increase in the number of new Dolphin shares in issue as and when the warrants are exercised.

Dolphin's share price closed unchanged at 81 sen today, with a market capitalisation of RM179.8 million.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)