KUALA LUMPUR (Jan 20): MMAG Holdings Bhd has raised its stake in ceramics and pottery products manufacturer CSH Alliance Bhd (formerly known as KTG Bhd) to 16.61% by subscribing for new shares in a rights issue.

MMAG emerged as a substantial shareholder in CSH last May after acquiring 35 million shares or a 5.07% stake in the company on the open market.

In a bourse filing, MMAG said it has now subscribed for another 35 million rights shares (on the basis of one  share for every one existing share held) and a further 159.5 million excess shares, both at 15 sen apiece for a total sum of RM29.18 million.

MMAG also received 194.5 million free detachable warrants on the basis of one warrant for every one rights share subscribed.

The consideration paid for the subscription was funded via MMAG's share margin facility, the company said.

MMAG believes that the diversification undertaken by CSH into transportation and logistics business and glove business will yield a positive return for the company in the long run.

The company said the rights issue price of 15 sen per share represents a discount of 31.82% compared with the unaudited net asset per share of 22 sen per share as at Sept 30, 2021 computed based on the enlarged CSH shares after the completion of the rights issue.

"This translated into a price to book of 0.68 times. Thus, MMAG is able to subscribe for the rights shares at a significant discount when comparing the subscription issue price and the unaudited net asset per share of CSH," it said.

"The warrants will also provide MMAG with an attractive option to increase its equity participation in CSH at a predetermined price during the tenure of the warrants," it added.

CSH — which previously was also known as DWL Resources Bhd and Spring Gallery Bhd — proposed the rights issue in April last year to raise up to RM103.61 million, mainly to fund its glove and transportation and logistics businesses ventures.

CSH has been loss-making for many years. For its first quarter ended Sept 30, 2021, net loss widened to RM699,000 from RM203,000 a year ago, despite revenue increasing to RM7.59 million from RM2.45 million.

It blamed the higher net loss on higher operationg and administrative expenses in maintaining the business of ceramic, construction and property division.

"The transportation and logistics segment also incurred higher operating expenses due to expansion of the business to provide better services to its customers in current quarter under review," it added.

MMAG was the day's third most actively traded counter on Bursa Malaysia on Thursday (Jan 20), with a volume of 181.83 million shares compared with 2.94 million shares on Wednesday.

The stock closed unchanged at eight sen, for a market capitalisation of RM105 million.

CSH closed unchanged at 10.5 sen, valuing the company at RM145 million.