KUALA LUMPUR (March 17): It is not exaggerated at all to describe the rally in Dataprep Holdings Bhd's share price as being far more powerful than that experienced by the glove makers and the technology counters on Bursa Malaysia.
It took several months for Top Glove Corp Bhd's share price to triple. However, Dataprep soared 23-fold from 16.5 sen on Feb 11 to a 20-year high of RM3.79 on Monday in slightly more than a month after trading below 50 sen over the past 15 years for the majority of the time since 2005.
The ICT solution provider retreated on Tuesday, falling 11.61% or 44 sen to RM3.35, with some 65.57 million shares changing hands. Still, it has rocketed over 20 times.
The meteoric rise in its share price has added RM2 billion worth of market capitalisation (cap) to Dataprep, which has been bleeding red ink for more than 10 years. Its market cap stood at RM2.04 billion based on the closing share price of RM3.35.
Is the sizeable market cap justifiable? The minority shareholders will have to count on the board to shed light on it.
The steep upward trend has caught the regulator's attention.
On March 1, Bursa Malaysia issued an unusual market activity query to Dataprep. The company told the stock exchange that it "is not aware of any" developments, apart from the proposed private placement made last month and a planned acquisition of a 51% stake in RIDAA Associates Sdn Bhd.
The latest proposed private share placement is the second one in less than a year.
To recap, last July, Dataprep's shareholders granted the green light for it to place out up to 139.06 million new shares, representing up to 30% of the total number of issued shares, to Widad Business Group Sdn Bhd (WBG) and third-party investors. The sizeable share placement was priced at below 20 sen, raising RM21.55 million. All shares were placed out by Dec 21 last year.
WBG emerged as a substantial shareholder in early October after it took up the share placement. It is worth noting that WBG is the parent company of Dataprep's controlling shareholder, Wardah Communication Sdn Bhd. Wardah Communication holds a 44.81% direct stake, while WBG owns a 8.81% stake, based on Bloomberg data.
WBG is the flagship of Tan Sri Muhammad Ikmal Opat Abdullah, who is also the controlling shareholder of public listed firm Widad Group Bhd. In short, Muhammad Ikmal, who holds a 54.25% stake in Dataprep, appears to be the biggest gainer of the share price rally.
Barely two months after the completion of its private placement exercise, Dataprep has again proposed yet another private placement. This time around, the number of new shares issued will be equivalent to up to 20% of its issued share capital. It aims to raise up to RM43.66 million from independent third-party investor(s) to be identified later and at an issue price to be determined later.
A bulk of the placement proceeds would be used for working capital requirements and "future investments and projects", according to a filing last month.
Besides that, Dataprep is also on an acquisition trail.
The company will be paying RM3 million for a 51% equity stake in RIDAA, which is principally engaged in the business of selling multimedia goods, hardware and other multimedia electronic components. It also carries out work as extra low voltage electrical contractors.
Roughly two weeks after Dataprep told the regulator that it was not aware of any major developments that had caused the big jump in its share price, the company announced that it had signed a memorandum of collaboration with IT consulting company Asia Coding Centre Sdn Bhd "to undertake a project in relation to providing an integrated solution technology for Covid-19 screening to Kementerian Kesihatan Malaysia (Ministry of Health [MOH])".
However, it is not stated in the announcement that whether MOH has agreed to adopt the Covid-19 screening technology that the partnership is working on currently.
On Monday, Dataprep revealed that it acquired two companies from Asia Coding, with a 51% stake in each of them, for a total of RM561.
Bursa has warned investors to exercise caution and make informed decisions in trading of Dataprep's shares. The regulator reiterated that it "will not hesitate to take appropriate regulatory action to ensure fair and orderly trading".
Dataprep has a share placement plan in the pipeline. Based on its issued share capital of 609 million, a placement of 20% of share capital will entail an issue of 121.8 million shares.
To raise RM43.66 million of fresh funds, the block of new shares would be priced at about 35.8 sen per share, which is barely 10% of the market price, based on calculations on the back of an envelope.
Again, shareholders will suffer another round of dilution. For that, they will have to count on the company's board to weigh the dilution effect and the merits of raising the fresh capital.