KUALA LUMPUR: Sabah-based fast food operator and energy outfit Borneo Oil Bhd has proposed a one-for-six renounceable rights issue together with free warrants to raise gross proceeds of up to RM356.07 million. The bulk of the proceeds will be used to expand and accelerate its gold mining activities and operations in Malaysia — further enhancing its earnings in future years.
In a filing with Bursa Malaysia yesterday, Borneo Oil (fundamental: 1.65; valuation: 0.5) said it will undertake a rights issue of up to 2.37 billion rights shares at an indicative issue price of 10 sen per rights share on the basis of six rights shares for every one existing Borneo Oil share held.
This is together with up to 1.19 billion free detachable Warrants C on the basis of one free Warrant C for every two rights shares subscribed to, on an entitlement date to be determined later.
Borneo Oil said its substantial shareholders — Victoria Ltd (25.48%) and Hap Seng Insurance Services Sdn Bhd (16.72%) — have pledged to subscribe in full for their respective entitlements, while the public portion of the rights issue will be underwritten by RHB Investment Bank Bhd.
The issuance of the rights issue and free warrants is expected to enlarge Borneo Oil’s issued capital to 3.956 billion shares from 372.319 million shares currently.
The indicative issue price of 10 sen per rights share represents a discount of approximately 41.11% to its theoretical ex-price of 16.98 sen per share, based on the five-day weighted average market price of 79.8 sen that was calculated up to April 21, 2015.
Borneo Oil said the gross proceeds to be raised from the exercise of the Warrants C will be used as additional working capital.
“For illustrative purposes only, the gross proceeds ... expected to be raised upon full exercise of the Warrants C based on the indicative exercise price of 10 sen per share is approximately RM111.7 million under the minimum scenario and approximately RM118.69 million under the maximum scenario,” the company said in the filing.
“Now with the necessary funds to be made available for this division to pursue its planned expanded operations, the company is optimistic that the net contribution from the prospecting and mining works would potentially exceed 25% or more of Borneo Oil Group’s net profit in the near future,” Borneo Oil said in a separate statement.
Borneo Oil is the exclusive subcontractor for the exploration and mining of alluvial and lode gold in three districts in Pahang — Mukim Batu Yon and Hutan Simpan Hulu Jelai in Lipis and Hutan Simpan Bukit Ibam in Rompin — covering a total of 1,565.1ha.
The group also operates a 157.72ha limestone mining operation in Ulu Segama, Lahad Datu, Sabah.
“The board of directors is confident that, with the addition of the gold mining business starting to come to fruition, these positive developments augur well for the financial performance of Borneo Oil in both the foreseeable and long-term future,” Borneo Oil said, adding that it expects to complete the transaction by the third quarter of this year.
Meanwhile, Borneo Oil said 14 new franchised outlets will be added to its fast food chain, Sugarbun, this year. Currently, there are 76 franchised outlets in Malaysia and abroad.
The stock ended the day 0.65% higher at 78 sen yesterday, for a market capitalisation of RM286.76 million.
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. Go to www.theedgemarkets.comfor more details on a company’s financial dashboard.
This article first appeared in The Edge Financial Daily, on April 28, 2015.