KUALA LUMPUR (April 15): Techfast Holdings Bhd has proposed to split one existing share into two units and undertake a rights issue of up to 909.2 million new shares to raise money which will finance the working capital requirements of the group's existing businesses under a corporate revamp, which will see Techfast sell its core self-clinching fasteners and industrial components manufacturing operations.

In a Bursa Malaysia filing yesterday, Techfast said proceeds raised from the rights issue of new shares and free warrants was intended to fund working capital requirements of Techfast's existing business, which includes oil bunkering and trading of petroleum products.

According to Techfast, the company also yesterday (April 14) entered into a conditional share sale agreement with Lu Eng Shean for the proposed disposal of Techfast's 100% equity interest in Techfast Precision Sdn Bhd (TPSB) for RM6.1 million.

"TPSB is principally involved in the manufacturing and distribution of specialised fasteners and related precision turning and machining parts for the electronics, telecommunication, computer peripherals and automotive industries. 
Due to advancements in the assembly process of computers and televisions, the main products of TPSB i.e. self-clinching fasteners and precision turning parts are becoming obsolete and are experiencing lower demand and orders received are usually in smaller quantities, which had resulted in lower production efficiency and a business that is no longer scalable, as evident by the decreasing profit after tax recorded.

"TPSB also faced increased competition from China as well as India in recent years, which has resulted in compressed profit margins and even though the management has been keeping operating expenses to a manageable level, the business has lower profitability as evidenced by the profit after tax recorded of only RM171,533 for the latest financial year ended Dec 31, 2020.

"As such, to reduce the cost of maintaining the operations of a low-profit business, the board has decided to undertake the proposed disposal and the proceeds raised from the proposed disposal will be used to fund Techfast group's other business activities that are more profitable," Techfast said.

On the one-to-two share split, Techfast said that upon completion of the corporate exercise, the company's number of issued shares will increase from 349.69 million to 699.39 million under the minimum scenario, which assumes none of Techfast's employee share option scheme options are granted and exercised prior to the implementation of the proposed share split and that the proposed rights issue with warrants is undertaken on the minimum subscription level.

"The board intends to undertake the proposed share split to reward the existing shareholders of the company in the form of subdivided shares for their loyalty and continued support as the proposed share split serves to increase the number of Techfast shares held by the company's shareholders at no cost to be incurred by the shareholders, while maintaining their percentage of equity shareholding held in the company," Techfast said.

Techfast said the share split may result in improved trading liquidity of Techfast shares and widen the shareholder base of the company.

Meanwhile, Techfast said its renounceable rights issue will involve up to 909.2 million new shares on the basis of one rights share for one existing Techfast share and up to 454.6 million free detachable warrants on the basis of one warrant for two rights shares subscribed for.

Techfast said it will fix the issue price of the rights shares at a later date.

"For avoidance of doubt, while the proposals are not inter-conditional, it is the intention of the board to complete the proposed share split prior to the implementation of the proposed rights issue with warrants.

"Assuming all the entitled shareholders subscribe in full for their respective entitlements of the rights shares, the proposed rights issue with warrants would entail the issuance of 909.2 million rights shares, raising total gross proceeds of RM109.1 million," Techfast said.

Barring any unforeseen circumstances and subject to all required approvals being obtained, the share split, rights issue with warrants and TPSB disposal proposals are expected to be completed in the third quarter of 2021, according to Techfast.

UOB Kay Hian Securities (M) Sdn Bhd has been appointed the principal adviser for the proposals, Techfast said.

At 3.59pm today, Techfast's share price fell five sen or 12.5% to 35 sen for a market value of about RM122.39 million.

The stock has been traded between 39 sen and 35 sen so far today.