KUALA LUMPUR (July 16): Ni Hsin Resources Bhd plans to raise between RM3 million and RM9.6 million through a renounceable rights issue, to fund the cookware maker’s diversification into the food and beverage (F&B) business.

The group has proposed a renounceable rights issue of up to 960.1 million redeemable convertible preference shares (RCPS) at an issue price of one sen per RCPS, on the basis of two RCPS for every one ordinary share held by entitled shareholders, at a date to be fixed.

According to the group, the proposed rights issue of RCPS is intended to be undertaken on a minimum subscription basis, which will entail the issuance of 300 million RCPS. For this, Ni Hsin has obtained an irrevocable written undertaking from Khoo Chee Kong, being the major shareholder and key management of the group, to subscribe or procure the subscription of 300 million RCPS.

“At a minimum and maximum scenario, the proposed rights issue of RCPS will raise a total amount of RM3 million and RM9.6 million respectively. For the RM9.6 million raised, the company intends to utilise RM5.5 million to set out a production line for its new F&B products,” it said, adding it will use RM3.6 million from the balance in the maximum scenario for its day-to-day working capital requirements.

“The company’s cookware and clad metals businesses have been incurring operating losses for financial year ended Dec 31, 2018 (FY18) and (FY19), as a result of competition from overseas competitors, turbulent global market condition and ongoing trade war between the US and China, which have impacted global business sentiments.

“[In light of this], the proposed diversification enables the company to venture into other revenue-generating businesses as a way to mitigate the risk of over-dependence on its existing core businesses,” it said.

Ni Hsin’s F&B business will be spearheaded by Khoo, who has years of relevant experience in F&B, according to the group. The company has yet to start the new business but said it is in serious talks with potential strategic partners in the F&B sector.

“The board believes that the proposed diversification is expected to contribute positively to the company’s future earnings and improve its financial position upon commencement of the F&B business,” the group said, adding it also remains focused on carrying on its existing core businesses.

The proposals will be up for shareholders approval at its upcoming extraordinary general meeting.