KUCHING: KNM Group Bhd (KNM) will see a reduction in its gearing ratio as it looks to use the bulk of proceeds from the oversubscription of its rights issue shares and warrants would go towards the repayment of debts.
The group had announced on Bursa Malaysia that its rights issue shares and warrants were both oversubscribed by 31.45 per cent, raising some RM195.5 million.
OSK Research Sdn Bhd (OSK Research) in a note stated, “While the oversubscription is a positive signal from shareholders, we believe that there are no earnings upside to our FY13 (financial year 2013) forecasts as the bulk of the proceeds (more than 75 per cent) would be used for repayment of bank borrowings.
“As at June 30, 2012, the group’s net gearing ratio stood at 52.4 per cent. With the completion of the exercise, we expect that the group’s net gearing ratio to trend downwards to 35 to 40 per cent by FYE12.
“We are making no changes to our FY13 forecasts as we have previously assumed a lower interest expense in FY13 due to lower borrowings moving forward,” it stated.
The research house did not expect any earnings upside to its forecasts from the proceeds of the rights issue. It revised the stock’s fair value downwards to 55sen per share from 81sen, pegged to the group’s diluted 11 times FY13 earnings per share due to the enlarged share base.