KUALA LUMPUR (March 3): Malayan United Industries Bhd (MUI), a company involved in the retailing, hotel, property, food and financial service businesses, has proposed to undertake a RM3.07 billion capital reduction exercise to offset RM3.06 billion in accumulated losses as at Dec 31, 2021.

The proposed exercise entails a reduction of the issued share capital of MUI via the cancellation of the company's paid-up capital of RM3.07 billion. The credit arising from the cancellation will be used to offset the accumulated losses. Less the estimated expenses for the exercise of RM165,000, the remaining RM8.65 million will be credited to the retained earnings of the company, which will be used in a manner to be determined by the board at a later date.

In a bourse filing on Thursday (March 3), MUI said the proposed capital reduction will enable the company to eliminate its accumulated losses to reflect more accurately its financial position.

"It will also enhance the company's ability to declare and pay dividends out of its retained earnings in the future when the company returns to profitability. The proposed capital reduction would also enhance MUI Group's credibility with its customers, financiers, suppliers and investors," it added.

It noted that the proposed exercise will not have any material effect on the group's earnings and earnings per share for the financial year ending June 30, 2022 (FY22).

The proposed capital reduction is subject to shareholders' nod at an extraordinary general meeting to be convened. Barring any unforeseen circumstances, the corporate exercise is expected to be completed in the second quarter of 2022.

TA Securities Holdings Bhd has been appointed as the adviser for the exercise.

On Jan 27, MUI announced its plan to raise RM19.06 million via a private placement of up to 10% of its issued shares to repay bank borrowings and for working capital, which was approved by Bursa Securities on Feb 9. However, the company has not issued any placement shares to date.

But pursuant to the private placement, its issued share capital is expected to be bumped up to RM3.17 billion from RM3.15 billion as at end-March. The issued share capital of MUI, however, will be reduced to RM101.78 million following the proposed capital reduction.

MUI reported a smaller net loss for FY21 of RM98.67 million — down 50.3% from RM198.71 million in FY20 due to lower administrative expenses and other expenses. Revenue for FY21, however, fell 39.3% to RM180.71 million from RM297.8 million in the previous year, on lower revenues generated across its hotel, retailing and food divisions.

MUI shares closed unchanged at 6.5 sen on Thursday, giving the company a market capitalisation of RM177 million.