KUALA LUMPUR (Apr 28): Loss-making communications and software solutions provider NetX Holdings Bhd plans to raise up to RM62.56 million via a 1-for-1 rights issue of up to 625.55 million shares, with free detachable warrants, to expand into the electronic payment solutions business.

The warrants will be on the basis of one free warrant for every one rights share subscribed at an entitlement date to be determined later, the filing of the ACE-listed company to Bursa Malaysia showed today.

The proceeds to be raised from the proposed rights issue is based on an indicative issue price of 10 sen per share and will be used to develop an electronic payment platform for electronic funds transfer at point-of-sale terminals.

“Currently, the group is at the planning stage and the proceeds from the proposed rights issue of shares with warrants would enable us to develop an electronic payment platform and set-up an electronic payment support system to a stage, where it is ready to be commercialised,” said NetX.

It has also proposed to increase its authorised share capital to 5 billion shares from 700 million shares currently to accommodate the issuance of the new rights shares. The proposed issuance of the rights issue will enlarge NetX’s issued and share-capital to 2.44 billion shares, from 625.55 million share currently, which may dilute its future earnings per share.

In addition, NetX (fundamental: 1.25; valuation: 2.6) announced it intends to establish a share issuance scheme of up to 30% of its issued and paid-up capital.

“The proposed share issuance scheme will provide eligible persons with an opportunity to have equity participation in the company,” the group said.

According to NetX, “the proposed rights issue with warrants and share issuance scheme are conditional upon the proposed increase in authorised share capital, but not vice versa.”

Meanwhile, of the expected gross proceeds raised, NextX said up to 70% or RM44.06 will be used to acquire smaller technology companies that have a developed mobile-based solutions, which has the potential to be commercialised.

“Among the companies to be considered include those in cloud based applications; and smartphone applications that are developed for fourth-generation long-term evolution mobile spectrum would be considered complementary to our business strategy,” the group said.

NetX said the remaining 16% or RM10 million will be used to develop an electronic payment platform and solutions, while the remaining 14% or RM8.495 million will be used as working capital, repayment of existing bank borrowings, and related-expenses.

Assuming the full exercise of the rights issue with warrants and share issuance scheme, NetX’s borrowings are expected to drop significantly to RM56,000, with a negligible gearing ratio from RM3.656 million or 0.12 times gearing ratio currently.  

Pending regulatory approval and shareholders’ nod at an extraordinary general meeting to be convened at a later date, NetX expects to complete the corporate exercises in the second half of this year.

Currently, systems management company Metronic Global Bhd has an 11.6% stake in NetX; followed by business incubator and strategy advisory Asia Bioenergy Technologies Bhd, with another 8.95%.

The stock slipped 7.14% to end the day at 6.5 sen, with 3.26 million shares having changed hands for a market capitalisation of RM40.66 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.)