Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily, on March 11, 2016.

 

KUALA LUMPUR: Being the major shareholder, the Employees Provident Fund (EPF) will be pumping as much as RM1.3 billion into Malaysia Building Society Bhd (MBSB) to subscribe to the latter’s proposed renounceable two-call rights issue.

MBSB, which has terminated two merger talks within 13 months, yesterday announced to Bursa Malaysia its proposal to undertake a renounceable two-call rights issue to raise up to RM2 billion — an amount equivalent to almost half of its current market capitalisation of RM4.09 billion.

The first call of the rights issue will be payable in cash and the second call shall be capitalised from MBSB’s share premium and/or retained earnings account, according to the announcement to Bursa.

“The issue price (comprising the first call and the second call) and the entitlement basis for the proposed rights issue have not been fixed at this juncture to provide flexibility to the board in respect of the pricing of the rights shares and the number of rights shares to be issued,” said MBSB.

EPF is the single largest shareholder of MBSB with a 65.1% stake, followed by tycoon Tan Sri Chua Ma Yu, who bought a 6.06% stake last week. Meanwhile, Permodalan Nasional Bhd owns 3.32% of MBSB’s shares.

In the announcement, MBSB said it had procured a written undertaking dated March 10 from the EPF board, which has undertaken to subscribe in full for its entitlement under the proposed rights issue based on its shareholdings of 1.85 billion MBSB shares as at March 4.

EPF’s undertaking is subject to first call being priced at a minimum discount of 25% to the theoretical ex-rights price (TERP) based on the five-market-day volume weighted average price (VWAP) of MBSB shares up to the market day preceding the announcement of the price-fixing.

“Based on EPF’s shareholdings and the maximum gross proceeds, the undertaking will be up to RM1.3 billion [and] the remaining portion of rights shares for which no undertaking is obtained will be fully underwritten,” said MBSB.

It also noted that it is the board’s intention the first call to be priced at a discount of at least 25% to the TERP based on the five-market-day VWAP of MBSB shares immediately preceding the price-fixing date.

MBSB’s share price has been on a decline since October 2014, falling from the peak of RM2.52 to a low of RM1.30 in August 2015. The stock closed at RM1.44 yesterday.

MBSB, which is currently undertaking kitchen sinking exercise booking in massive provision for non-performing loans (NPLs), said the proposed rights issue is in line with its strategy to strengthen its core capital.

The proposed rights issue will also enable MBSB to increase its leverage ratio to at least 12.5% in compliance with Bank Negara Malaysia’s requirement, it added.

MBSB’s net profit shrank to RM257.59 million for the financial year ended Dec 31, 2015 (FY15) from RM1.01 billion the previous year. The sharp fall in earnings was mainly dragged down by provision for NPLs that swelled to RM697.2 million, compared with RM126.2 million in FY14.

MBSB has been in two merger talks since 2014. Last month, MBSB and Bank Muamalat Malaysia Bhd aborted their plan for a merger to create the country’s largest stand-alone Islamic bank. Prior to that, MBSB was part of a failed mega bank merger with CIMB Group Holdings Bhd and RHB Capital Bhd, which was called off in January last year.

Based on MBSB’s issued share capital of 2.84 billion as at Feb 29, the capital outlay required from an entitled shareholder holding 1,000 MBSB shares, who wishes to subscribe to his entitlement, is about RM705.

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