KUALA LUMPUR (June 1): ECM Libra Financial Group Bhd (ECM Libra) has proposed to distribute RM320.1 million of what it terms as excess cash to entitled shareholders, by way of a proposed share capital reduction and a proposed special dividend.
In a filing with Bursa Malaysia today, ECM Libra (fundamental: 1.35; valuation: 1.65) said the proposed distribution exercise will be in the form of cash and/or a combination of cash and distribution-in-specie of ordinary shares and/or warrants of Eastern & Oriental Bhd (E&O).
The E&O securities are currently part of the portfolio of securities held under Libra Strategic Opportunity Fund, which is held by ECM Libra.
ECM Libra said the distribution was in line with the objective of the group's capital management framework, which includes returning cash in excess of its requirement to shareholders, after taking into consideration its level of operations, cash, business prospects, investment plans and current and expected obligations.
“The board have taken cognisance of the size of the ECMLFG’s operations vis-à-vis the group audited shareholders’ funds, which stands at RM448.45 million as at 31 January 2015. In view of this, the Board is of the opinion that the shareholders would benefit more via the redeployment of capital to shareholders as it provides immediate value enhancement and improvement to the entitled shareholders’ long-term rates of return,” it added.
It assured shareholders that it intends to maintain its listing status subsequent to the cash disbursement, and continue with its existing core business of fund management through its wholly-owned subsidiary Libra Invest Bhd and manage its private equity investments.
As mentioned above, the cash disbursement by the boutique financial services group will be done by way of a proposed share capital reduction of approximately RM234.74 million and a proposed special dividend of RM85.36 million.
Pursuant to the distribution exercise, ECM Libra will embark on a proposed share split involving the subdivision of ECM shares, based on a ratio to be determined later, subject to the completion of the proposed distribution.
“Upon the completion of the proposed share split, the issued and paid-up share capital of ECM Libra is proposed to be consolidated into ordinary shares of par value 50 sen each,” it said.
After the proposed corporate exercises, ECM Libra's issued and paid-up capital is expected to be reduced to 64.02 million (RM32.01 million) or 68.78 million shares (RM34.39 million) from 268.22 million shares (RM268.22 million) currently.
ECM Libra said the proposals could provide an opportunity for it to redeploy excess assets to its shareholders and to reorganise its share capital base to reflect its existing level of operations and asset base.
It intends to fund the cash component of the proposed distribution through its existing cash reserves, cash raised from the retirement of its loan assets, and cash raised from the redemption of its investments in unit trusts and the realisation of shares held.
“The remaining balance of the distribution will be in the form of the E&O Securities under the proposed dividend-in-specie. In the event all the E&O Securities are fully realised in the interim period, the proposed distribution will then be undertaken wholly in cash,” it said.
Barring unforeseen circumstances, ECM Libra expects the proposals, which require the approval of its shareholders at an extraordinary general meeting to be convened, to be completed in the fourth quarter of the group's financial year ending Jan 31, 2016.
Shares in ECM Libra was suspended from trading today, it last closed at RM1.05, translating to a market capitalisation of RM281.13 million. Its counter will resume trading tomorrow.
(Note: 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.)