Friday 29 Mar 2024
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KUALA LUMPUR (May 11): YFG Bhd has attracted keen interest today despite the news that the group has proposed fundraising exercise, which includes issue of redeemable convertible notes that could cause earnings and shareholding dilution.

Dealers said the proposed fundraising exercise might cause dilution but it raised hope that the company's financial health might be revived with fresh capital being injected into the YFG.

The stock rose to a high of 9.5 sen in the morning. Some 5.83 million shares changing hands as at noon.

"Investors are buying into the stock as they think the counter is cheap," a dealer told theedgemarkets.com over the phone.

He explained the company’s net assets per share were expected to increase to 15 sen after the issuance of the notes as compared to five sen currently. "This has prompted the buying interest from the investors," he said.

YFG (fundamental: 0.15; valuation: 0.3) announced last Friday that it wanted to raise RM100 million through the proposed issuance of redeemable convertible notes programme with a tenure of five years, for working capital (RM70.5 million) and to repay bank borrowings (RM22 million).

The amount to be raised is double its market value of RM51.8 million, based on its closing price of 8.5 sen last Friday.

The electrical and mechanical engineering services provider said it had appointed Kenanga Investment Bank Bhd for the issuance, which comprises redeemable convertible commercial papers and/or redeemable convertible medium term notes (MTN).

YFG also entered into a conditional subscription agreement (subscription agreement) with Advance Opportunities Fund and Advance Capital Partners Pte Ltd, for the subscription to the notes issued.

As at March 31, YFG had accumulated losses of RM34.23 million.

Over the past year, YFG had proposed several measures to revive its financial health.

It had on April 13 proposed to reduce its par value which involved the cancellation of eight sen of the par value of every existing share of 10 sen in YFG to pare down its accumulated losses.

"Based on the above, the proposed par value reduction would give rise to a credit of between RM48.73 million under the Minimum Scenario and RM85.14 million under the Maximum Scenario, which will be utilised to set-off against the accumulated losses of the company.

"The remaining balance will be credited to the capital reserves of the company which may be utilised in such manner as the board deems fit and as permitted by the relevant and applicable laws," it added.

On Nov 12 last year, YFG also has proposed a private placement of up to 9.7 million new shares to raise RM9.7 million.

According to the filing to Bursa Malaysia, it said the shares would be placed out to investors the company had yet to identify.

(Notes: 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.)

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