KUALA LUMPUR (Aug 29): SEGi International Bhd is proposing a capital reduction and repayment exercise of up to RM108.31 million or 15 sen per share, to reward its shareholders and to increase its return on equity (ROE), without affecting shareholders' shareholding.

According to the education group, its ROE is expected to increase to 35.41% from 10.94% presently.

Its major shareholder, who is also the group managing director, Tan Sri Clement Hii Chii Kok, is likely to get RM34.71 million from the exercise.

Hii has a direct stakeholding of 231.41 million or 32.05% stake in SEGi as at March 31, 2016.

SEGi said the proposed capital repayment will be implemented by way of a reduction of its issued and paid-up share capital by reducing par value of its shares to 10 sen per share, from 25 sen currently.

As at Aug 23, 2016, being the latest practicable date prior to the date of this announcement (LPD), the issued and paid-up share capital of SEGi is RM187.02 million for 748.09 million shares.

In conjunction with the proposed exercise, the company will not purchase and/or sell any additional shares pursuant to its share buy-back exercise, until completion of the proposals.

SEGi will also set aside cash and bank balances of approximately RM108.31 million for the exercise, and will not vest any allocations of the options granted under the Employees' Share Option Scheme 2014/ 2024.

According to the group, the proposed capital repayment will be funded via internally-generated funds.

Based on the latest unaudited quarterly results for the six month financial period ended June 30, 2016, it has a total cash and bank balances of about RM110.64 million.

In a separate announcement, SEGi announced that its net profit for the second quarter ended June 30, 2016 (2QFY16) fell 60.2% to RM3.17 million, or 0.44 sen per share, from RM7.96 million or 1.16 sen per share, due to the drop in student enrolments.

Revenue for the quarter was down marginal by 0.6% to RM64.69 million, from RM65.07 million a year earlier.

For the cumulative six months (1HFY16), its net profit was down 57.2% to RM8.04 million, from RM18.78 million a year ago, while revenue fell 2.5% to RM129.08 million, versus RM132.43 million in 1HFY15.

Going foward, SEGi said it is cautiously optimistic for this year, given the economic uncertainties which are causing the market to be cautious as well.

It sees potential that the weakened ringgit will attract more international students to its campuses.

"The group has also widened its offerings to reach various segments of students, as well as regions in which we operate. Given our broader marketing strategies and course offerings, we believes that our financial performance will improve," it added.

Meanwhile to facilitate the capita reduction exercise, SEGi has proposed to amend Clause 5 of the Memorandum of Association, which will see the capital of the company reduced to RM250 million for 2.5 billion shares of 10 sen each.

It also proposed Clause 3 of the Memorandum of Association to reduce its authorised share capital to RM250 million, divided into 2.5 billion shares of 10 sen each.

It noted that its gearing ratio will increase to 0.05 times, from 0.01 times, upon completion of the corporate exercise.

The proposal is pending for shareholders approval at the forthcoming extraordinary general meeting (EGM), as well as other approval from relevant authorities.

Barring any unforeseen circumstances and subject to all relevant approvals being obtained, SEGi expects to complete the deal by the first quarter of 2017.

Shares in SEGi closed unchanged at RM1.18 today, for a market value of RM851.66 million.