KUALA LUMPUR (Nov 16): Malaysian Resources Corp Bhd (MRCB) plans to undertake a private placement of up 20% of its issued and paid-up share capital to its major shareholder Gapurna Sdn Bhd and independent third party investors to be identified later, which could raise up to RM612.08 million for its property development activities, working capital and borrowings repayment.

The property and infrastructure developer told Bursa Malaysia today that this will entail the placement of between 357.32 million (minimum scenario) and 493.61 million (maximum scenario) new shares.

Under the minimum scenario, it assumes that none of its 109.95 million options granted under its employee share option scheme (ESOS) and 576.52 million outstanding warrants is exercised before the the proposed private placement; under the maximum scenario, it assumes all ESOS options and outstanding warrants are fully exercised prior to the implementation.

The proposed private placement may be implemented in tranches within six months from the date of Bursa Malaysia Securities Bhd's approval for the listing of and quotation for the shares, while the issue price of the shares for each tranche shall be determined at later date(s). 

But based on an indicative issue price of RM1.24 per placement share, the exercise is expected to raise gross proceeds of between RM443.072 million and RM612.08 million, and reduce its gearing from 1.86 currently to between 1.48 and 0.88, its filing showed.

Gapurna has given an undertaking to subscribe to 60 million of the placement shares, and indicated its intention to subscribe to a further 60 million, subject to, among others, when the proposed private placement is implemented, the actual issue of the placement shares, and its cashflow and/or availability of external financing.

Gapurna, which is controlled by Tan Sri Mohamad Salim Fateh Din, holds a 16.7% stake in the group and is its second largest shareholder after the Employees Provident Fund (EPF), which holds a 38.37% stake.

After the private placement, Salim's indirect stake could rise up to 19.5% - assuming Gapurna takes up the full 120 million shares - while EPF's stake could be diluted to as low as 23.14%.

As at Oct 30, its issued and paid-up capital stood at RM1.787 billion comprising 1.787 billion shares. Pursuant to the private placement, this could rise to as much as RM2.962 billion, comprising 2.962 billion shares.

The bulk or some 61% of the private placement's proceeds would go to its property development activities, followed by working capital (about 23%), and repayment of borrowings (about 14%); the rest would be used to defray expenses related to the proposed private placement.

The proposed exercise, which will require shareholders' approval at an extraordinary general meeting to be convened, is expected to be completed in the second quarter of 2016. 

MRCB expects the utilisation of the placement proceeds to contribute positively to its future earnings.

MRCB's share price slipped 1 sen to close at RM1.42 today for a market capitalisation of RM2.54 billion.

(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.)