KUALA LUMPUR (June 14): Crude palm kernel oil producer Green Ocean Corp Bhd, which jumped on the rubber glove bandwagon last October, has proposed to raise an additional RM12.95 million from a private placement to fund the capital expenditure for its new glove business.

This follows two recent two fundraising exercises comprising a private placement of 30% of the then existing total issued shares and a rights issue involving the issuance of 828.57 million new shares, which had raised a combined RM94.6 million – but short of the expected total proceeds of RM122.36 million.

"The two fund raising exercises were expected to raise total proceeds of RM122.36 million based on an illustrative issue price of 19.65 sen per placement share and 12.5 sen per rights share. However, due to the lower share price of the company at the relevant point in time, (it) could only raise total proceeds of RM94.6 million based on the issue price of 12.28 sen per placement share and 10 sen per rights share," said Green Ocean in a bourse filing today.

Due to the shortfall, the group could only embark on the first phase of its glove business involving six glove-dipping lines, instead of the intended 12 lines over two phases.

"Based on the latest quotation obtained from the supplier, the estimated cost for the glove-dipping lines has now increased by RM1.35 million per line (that is, from RM6.8 million per line to RM8.15 million per line), mainly due to the increase in steel prices. For a total of six lines, this has resulted in a shortfall of RM8.1 million.

"In addition, the group intends to commission an additional two glove-dipping lines for an estimated total cost of RM16.3 million," said Green Ocean.

Therefore, to meet the shortfall, the ACE Market-listed company is proposing to undertake a private placement of up to 351.93 million new shares, representing 20% of the existing issued shares, to independent third-party investor(s) to be identified and at an issue price to be determined late.

Based on an illustrative issue price of 3.68 sen per placement share, the proceeds to be raised from the proposed private placement is RM12.95 million.

Upon completion of the proposed exercise, its capital base will be enlarged to 2.11 billion shares, from 1.76 billion shares as at June 3, 2021.  

Despite the expected dilution in the consolidated earnings per share/loss per share in the short term, Green Ocean believes that the gloves business is expected to provide additional income to the group by capitalising on the current global demand for rubber gloves. "This will aid the company in its effort to continuously improve its financial performance and to enhance value for the shareholders, moving forward."

Subject to all relevant approvals being obtained, the proposed private placement is expected to be completed by the third quarter of 2021.

Mercury Securities Sdn Bhd has been appointed as the principal adviser and placement agent for the proposed exercise.

Green Ocean shares closed unchanged at 4 sen today, bringing a market capitalisation of RM70.39 million.