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This article first appeared in The Edge Financial Daily on October 16, 2018

KUALA LUMPUR: Loss-making Aturmaju Resources Bhd plans to raise up to RM10.1 million via a renounceable rights issue to fund its diversification into providing information technology (IT) solutions and services.

Aturmaju said the proposed diversification is part of the group’s plans to diversify its business activities and to provide another revenue stream to reduce its dependence on its core existing resource-based timber-related business.

In a filing with Bursa Malaysia yesterday, the manufacturer of wood products proposed to undertake a renounceable rights issue of up to one billion irredeemable convertible preference shares (ICPS) on the basis of 15 ICPS for every one existing share held on an entitlement date to be determined later at an issue price of one sen per ICPS.

The conversion price has been set at 20 sen for one new Aturmaju share, representing a 34% discount to the theoretical ex-rights price of Aturmaju shares of 30.3 sen based on the five-day weighted average market price of the shares up to Oct 3 of 40.6 sen.

Under the minimum scenario, a total of RM4 million is expected to be raised from the corporate exercise, of which RM2.8 million will be used for development costs of Enterprise Resource Planning (ERP) solutions, RM500,000 for working capital and the rest for the estimated expenses for the rights issue.

In a maximum scenario, a total of RM7.7 million will be used for development costs of ERP solutions and another RM1.7 million for working capital.

In June, Aturmaju commenced its IT business through the awarding and completion of an IT project to design, develop, install and support ERP solutions with a project value of RM20,000. As at Oct 3, the group had secured another three ERP projects worth a combined RM5.6 million.

“In addition, the group is also in discussions with another three prospective clients to secure additional IT projects focusing on providing or maintaining ERP solutions with a total estimated project value of RM9 million.

“The board of directors expects the IT business to result in a diversion of more than 25% of Aturmaju group’s net assets or contribute 25% or more of the group’s net profit,” it said.

As such, the board will seek the company’s shareholders’ approval for the proposed diversification at an extraordinary general meeting to be convened.

“Barring any unforeseen circumstances and subject to the relevant approvals being obtained, the proposals are expected to be completed by the first quarter of 2019,” said Aturmaju.

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