KUALA LUMPUR (Sept 7): Timber-based Leweko Resources Bhd’s renounceable rights issue, which is priced at above market value, is substantially undersubscribed.

The rights issue of 161.17 million shares with detachable warrants was fixed at 20 sen per share with free warrants, compared with today’s closing of 11.5 sen.  

In a filing with Bursa Malaysia, Leweko said up until Sept 2 the company received valid acceptances and excess applications for a total of 80.15 million shares, representing 49.73% of the total number of available shares under the rights issue with warrants. The company’s share price closed at 14 sen on Sept 2.

Leweko said as the acceptances and excess applications received fall below the maximum issue size of 161.17 million shares, the issue size of the rights issue with warrants shall be based on 80.15 million shares and 100.18 million warrants.

The rights shares and warrants are expected to be listed on Bursa Malaysia next Tuesday.

To recap, Leweko had proposed the rights issue with warrants on Oct 28, 2014, which entails an issue of up to 161.17 million new rights shares on the basis of two rights shares for every three shares held, together with up to 201.46 million free detachable warrants at five warrants for every four rights shares subscribed.

The exercise was to partly finance the joint venture (JV) between Maju Weko Timber Industries Sdn Bhd — a wholly-owned unit of Leweko — and Kampung Kenayat Sdn Bhd to develop 38 parcels of land in Perak.

It was previously announced that the parties were to develop a mixed-use development on the land, with a gross development value of RM350 million.

The JV signalled Leweko’s venture into the property development segment, as the group aims to diversify its earnings base and reduce its dependency on the trading of logs and manufacturing of precast concrete products.

Leweko shares closed one sen or 8% lower at 11.5 sen, with a market capitalisation of RM29.01 million.

(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.)