KUALA LUMPUR (April 10): Electronics gaming machines manufacturer RGB International Bhd has proposed a private placement of up to 123.23 million shares — equivalent to 10% of its issued and paid-up capital — to selected investors.

In a filing with Bursa Malaysia this evening, RGB (fundamental: 1.7; valuation: 1.2) said proceeds from the private placement exercise will be used to repay borrowings, as well as to purchase gaming machines for its existing on-going concessions in the Philippines and Indo-China.

“At this juncture, RGB has not determined the number of gaming machines to be purchased, as the company is still assessing the placement and types of gaming machines that will best entice its target market,” the group said in the filing.

RGB added the purchase of gaming machines — stemming from the private placement exercise —  will increase its revenue and profitability, as well as strengthen its shareholders’ funds and liquidity of its shares.

Assuming an indicative issue price of 15 sen per share, RGB said it expects to raise up to RM18.48 million in gross proceeds, of which some RM10.3 million will be used to pay its borrowings and RM7.68 million to purchase gaming machines.

RGB’s current total borrowing stands at RM73.96 million, equivalent to a gearing ratio of 0.95 times.  

“RGB is unable to determine the actual amount of proceeds to be raised from the proposed private placement at this juncture, as the amount to be raised will depend on, among others, the actual issue price and the actual number of placement shares to be issued,” the group said.

However, the group was quick to add that the issue price of its placement shares will not be lower than its par value of 10 sen per share.

RGB expects to complete the private placement exercise by the third quarter of 2015.

Besides Malaysia, RGB has a major machine concession footprint in Cambodia, Laos, Vietnam, Singapore, the Philippines and Macau.

RGB is controlled by its managing director Datuk Chuah Kim Seah with a 28.55% stake, while its executive director Mazlan Ismail via Gerak Juara Sdn Bhd owns a 10.9% interest.

Upon completion of the proposed private placement, Chua’s shareholdings will be reduced up to 25.66%, while Gerak Juara’s stake will decrease to 9.52%.

The stock ended 3.13% higher at 16.5 sen today, with 8.58 million shares traded, giving it a market capitalisation of RM195.24 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)