KUCHING: The proposed issuance of Redeemable Convertible Notes (RCN) by Century Software Bhd (Censoft) was believed to fund the strategic acquisitions, possibly for a stake in Time Engineering Bhd (TEB) from Khazanah Nasional Bhd (Khazanah).
According to analysts from the research side of Kenanga Investment Bank Bhd (Kenanga Research) in a research report yesterday, the proposed utilisation of the proceeds arising from the proposed RCN issue is to be utilised to fund strategic acquisitions.
“We even do not rule out that this fund raising is meant for the acquisition of 45.03 per cent stake in TEB from Khazanah,” it said.
“It has been reported that Censof, Skali Group and My EG are interested in the above Khazanah stake in TEB, of which Khazanah is likely to draw a conclusion on the sale within weeks.”
The jewel in TEB is its 71.25 per cent equity interest in Dagang Net Technologies Sdn Bhd, explained the firm, which is currently holding a five-year government contract that will expire in 2014 to operate an electronic customs declaration value-added network and electronic permits for other government agencies.
It was not clear if Dagang Net would get any extensions to its existing concession at this juncture.
To recap, the company had proposed an issuance of Redeemable Convertible Notes (RCN) with an aggregate principal amount of up to RM100 million, which would be issued in four tranches.
“The issuance of the first and second Tranches Notes are set at RM25 million each while the third and fourth Tranches Notes will be at the amounts of RM30 million and RM20 million respectively,” it explained.
“The tenure of the Notes is 36 months and is expected to be due in 2016. An interest payment of two per cent per annum will be payable in arrears on June 30 and December 31.
“The conversion price is based on either 135 per cent of the 45-day daily traded volume weighted average prices (VWAP) or 88 per cent of the 45-day average closing price.”
To note, the notes will be privately placed to and purchased by the subscriber. The company for the proposed placement of the Notes will not issue offering circular or information memorandum.
The Notes will not be rated and transferable as well as listed on Bursa Malaysia.
“Assuming all the 43 million outstanding warrants are fully exercised, Censof’s total issued and paid-up share capital will be increased to 387.2 million.
The total enlarged issued and paid-up share capital will further balloon to 656.7 million after the conversion of the RCN into Censof shares,” Kenanga Research further highlighted.
This would increase the group’s gearing ratio substantially from the current 0.12 times (as of end-FY12) to 0.99 times after the issuance of the RCN and the full exercise of the warrants but will drop to 0.04 times upon the full conversion of the RCN.