KUALA LUMPUR (Nov 5): ARB Bhd’s share price fell by almost 30% on Friday (Nov 5) after the IT software and platform provider announced on Wednesday its proposed rights issue to raise money to finance the company’s business expansion.

At 9am on Friday, the counter opened 1.5 sen or 5.56% lower at 25.5 sen, with 2.88 million units traded. 

Later at 10.44am, the loss had widened to eight sen or 29.63%, pushing the stock to an intra-morning low of 19 sen. With 45.71 million shares transacted thus far, it was the second-most active stock on the local bourse.

In a bourse filing on Wednesday, ARB said the proposed rights issue involves the issuance of up to 1.075 billion new rights shares and will be implemented on a renounceable basis of one rights share for every one existing share held by entitled shareholders.

The shares will be issued on the basis of one share for every existing share. 

According to ARB, as at Oct 28, it had 608.21 million shares in issue as well as 467.13 million irredeemable convertible preference shares (ICPS), which can be converted at 20 sen each.

The company noted that the issue price of the rights shares shall be determined and announced at a later date.

However, it said that based on an illustrative price of 12 sen per rights share, the proposed rights issue is expected to raise up to RM129.04 million.

Of the gross proceeds, up to RM73.33 million will be used for funding future projects or acquisition and/or investment in other complementary businesses or assets.

Meanwhile, up to RM55 million will be utilised for funding the provision of hydroponics Internet-of-things (IoT) solutions, while up to RM710,000 will be set aside for estimated expenses for the proposed rights issue.

“Any additional proceeds raised in excess of RM129.04 million (if the issue price is higher than 12 sen) will be allocated for funding future projects or acquisition and/or investment in other complementary businesses or assets,” ARB added.

However, it noted that the proposed rights issue, which is expected to be completed in the first quarter ending March 31, 2022 (1QFY22), will dilute its earnings per share due to the increase in the number of shares, assuming that the consolidated earnings of the group remain unchanged.

“Notwithstanding that, the proposed rights issue is expected to contribute positively to the future earnings of the group in the ensuing financial years when the benefits of the utilisation of proceeds are realised,” ARB said in the bourse filing on Wednesday.

The company noted that in the event that the proceeds raised from the proposed rights issue are insufficient for its funding requirements for hydroponics IoT solutions, the shortfall is expected to be funded via internally generated funds, bank borrowings and/or future fundraising exercises.

Notably, ARB’s liabilities rose to RM55.34 million in 2QFY21 from RM27.93 million in 2QFY20.