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KUALA LUMPUR: Sanbumi Holdings Bhd, which has been loss-making since 2006, and is primarily involved in the provision of various tourism-related businesses, plans to diversify into property development to reduce its dependency on its existing businesses.

In a filing with Bursa Malaysia yesterday, Sanbumi said it had proposed to develop a mixed development comprising a 37-storey serviced apartments (436 units), and a nine-storey podium of shops, car parks and other facilities on freehold land measuring 70,988 sq ft at Jalan Rozhan, Bukit Mertajam, Penang.

The development, targeted to start construction in the second quarter of 2016, and to be completed in four years, carries an expected gross development value of about RM240 million, with an estimated development cost of RM180 million. 

“Through the proposed development, the group will be able to unlock the potential value of its investment in the land, and to redeploy it for the group's proposed new business venture,” said Sanbumi. 

It expects the new business to contribute more than 25% of the group's net profits in the future.

It intends to partly finance the project via a private placement, which it intends to undertake after a proposed par value reduction to cancel out 90 sen from the RM1 par value of each existing share.

It also plans to cancel all its treasury shares, which will reduce its issued and paid-up share capital to RM189.24 million, comprising 189.24 million shares — including 15.1 million treasury shares — to RM174.13 million with 174.13 million shares. 

The proposed par value reduction will give rise to a credit of RM156.72 million, which it said will be used to offset the company’s accumulated losses, which stood at RM105.84 million as at March 31. The group will see a retained profit of RM50.88 million upon execution of the proposal. 

Subsequently, Sanbumi plans to embark on a private placement, which entails the issuance of up to 52.24 million new shares or 30% of its total issued and paid-up share capital: 20% to its directors and substantial shareholders Datuk Chua Tiong Moon and Tan Sri Chai Kin Kong (10% each), and 10% to third-party investors.

“For clarity, the placement shares, which are allocated to third-party investors, are not intended to be placed out to the directors, major shareholders, chief executive of Sanbumi and/or persons connected with them,” it said. 

The issue price, said Sanbumi, may be at a discount, equivalent price or a premium to the five-day volume weighted average market price of its shares prior to the price-fixing date, but not lower than 10 sen apiece, being the par value of the shares. 

Based on an indicative issue price of 13.5 sen and assuming all placement shares are placed out, Sanbumi expects to raise RM7.05 million: RM1.75 million for working capital, RM5 million for the proposed development and the balance for expenses related to the proposals.

It noted that its share base will leap to 226.37 million shares from 174.13 million shares (post par value reduction) upon the completion of the private placement.

The proposals are expected to be completed by the fourth quarter of 2015. Together with the proposed development, they are subject to shareholders’ approval in an extraordinary general meeting to be convened. 

Sanbumi shares, which peaked at RM20 in 1996, have plunged to a record low of 13 sen last Thursday, and closed unchanged yesterday, with a market capitalisation of RM22.64 million. Year-to-date, it has fallen 23.53%.

 

This article first appeared in The Edge Financial Daily, on July 14, 2015.

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