Frankly Speaking: More clarity on Ageson’s funding needs required

This article first appeared in The Edge Malaysia Weekly, on November 1, 2021 - November 07, 2021.
Frankly Speaking: More clarity on Ageson’s funding needs required
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Ageson Bhd, formerly Prinsiptek Corp Bhd, announced its decision to abort a cash call on Oct 20, eight months after it was first proposed.

The construction and property development company’s rationale for the decision was the longer time expected for the completion of the proposed rights issue of up to 12.78 billion irredeemable convertible unsecured loan stocks, which would have raised around RM320 million — 3.7 times its market value of RM85 million as at last Thursday.

Of the amount, Ageson was planning to use RM302.89 million to part-finance a proposed mixed-use development in Perak with an estimated gross development value of RM1.24 billion, and repay debt amounting to RM15.16 million owed by its 53.33%-owned subsidiary Ageson Development Sdn Bhd to RHB Bank Bhd.

Following the termination, Ageson proposed on Oct 27 to undertake a private placement of up to 20% of its issued shares to raise a much smaller amount of RM18.7 million, noting that it was an “expeditious way” to access the capital markets for funds. It said it would use most of the funds to repay the amount owed to RHB.

However, the latest fundraising proposal raises questions about how Ageson plans to raise the substantial amount of funds required for its property project in Perak. Why did it propose the rights issue in the first place when it was aware of the timeline for such an exercise? It had indicated earlier that the rights issue was expected to be implemented in the fourth quarter of 2021. Was there a delay and what could have caused it? It is worth noting that Ageson’s share price has fallen 46% from 13 sen on Feb 26 when the exercise was announced, to seven sen last Thursday.

Meanwhile, the proposed private placement is expected to be completed by December this year.

Also, is the latest fundraising proposal a stop-gap measure, with more fundraising to come?

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