KUALA LUMPUR (Sept 8): TH Heavy Engineering Bhd (THHE)’s rights issue of up to 1.2 billion Islamic irredeemable convertible preference shares (ICPS-i) at 25 sen each is undersubscribed by 69.96% or 836.6 million shares.

At the close of acceptances on Sept 1, THHE had received valid acceptances and excess applications for only 359.21 million ICPS-i shares or 30.04% of the 1.196 billion available ICPS-i shares available for subscription, according to its filing on Bursa Malaysia.

Hence, THHE’s board has decided to allot the ICPS-i to all entitled shareholders and/or their renouncees and/or their transferees who have applied for the excess ICPS-i.

Accordingly, THHE said its major shareholder Lembaga Tabung Haji has mopped up an additional 740.79 million of the ICPS-i shares, thus pushing the total subscription to 1.1 billion shares to achieve the minimum subscription level.

THHE said the total gross proceeds raised from the rights issue of ICPS-i is RM275 million, and the ICPS-i are expected to be listed and quoted on the Main Market of Bursa Securities on Sept 14.

Recall that in its prospectus announced to Bursa Malaysia on Aug 14, THHE said it had obtained an additional undertaking from Lembaga Tabung Haji on April 30, 2015 to subscribe up to 1.1 billion of the ICPS-i shares in total.

Lembaga Tabung Haji had then confirmed that it has adequate financial resources to subscribe for its entitlement of 356.44 million shares as well as an additional 743.56 million shares.

On Feb 13 this year, THHE had proposed a rights issue of up to 1.2 billion new ICPS-i at 25 sen each on the basis of 16 ICPS-i shares for every 15 THHE shares, to raise gross proceeds of up to RM300 million.

THHE had said the tenure of the preference shares are five years, and the proceeds will be utilised mainly for capital expenditure, working capital, and repayment of debt.

The ICPS-i will have annual dividend rate of between 3% and 5%, it had said.

THHE had said then the 25 sen conversion price is a discount of approximately 22.1% to the theoretical ex-rights price (TERP) of 32.09 sen per share.

THHE (fundamental: 0.2; valuation: 0.9) shares have been trading below 25 sen since mid-June of this year. Year-to-date, THHE shares have declined 46.88%.

Its counter closed half a sen or 3.03% higher at 17 sen today, with a market capitalisation of RM196.19 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.)