KUALA LUMPUR (April 13): YFG Bhd has proposed to reduce the par value of its shares by cancelling 8 sen out of the par value of every existing ordinary share of 10 sen each.

In a statement to Bursa Malaysia today, YFG said the issued and paid-up share capital of YFG as at April 10, 2015 was is RM54.47 million, which comprises 609,07 million existing shares.

The sum is after deducting the discount on shares of RM6.43 million, which represents the fair value allocated to the company’s outstanding warrants issued in conjunction with the company’s rights issue of shares with warrants that was completed on March 31, 2011.

"The proposed par value reduction will give rise to a credit of between RM48.73 million under the minimum scenario and RM85.14 million under the maximum scenario, which will be utilised to set-off against the accumulated losses of the company," it said.

YFG said the proposed par value reduction will enable the company to rationalise its balance sheet by eliminating its accumulated losses, which will also enhance its credibility with bankers, customers and suppliers, as well as provide a better financial platform for the group's future growth.

YFG said the reduced share capital pursuant to the proposed par value reduction would also better reflect the present financial position of the company and the group.  

The remaining balance meanwhile, will be credited to the capital reserves of the company and may be utilised as and when the board deems fit.

According to its latest audited consolidated statements for the financial year ended June 30, 2014, the accumulated losses for the group after the proposed par value reduction would go down from RM35.33 million to RM28.51 million.

Post-par-value-reduction, it's capital reserve will also expand to between RM41.91 million (minimum scenario) and RM78.33 million (maximum scenario).

The proposed par value reduction will not result in any adjustment to the share price of YFG and the existing number of ordinary shares of YFG in issue, said YFG.

To facilitate the reduction in the par value of its shares, it has also proposed an amendment to its Memorandum and Articles of Association.

The proposals will be subject to the shareholders approval at an extraordinary general meeting to be convened.

YFG closed down half sen or 4.55% at 10.5 sen today, giving it a market capitalisation of RM63.95 million.