KUCHING: QL Resources Bhd’s (QL Resources) recent proposal to undertake a private placement, share split and issuance of free warrants was aimed at increasing its production capacity in its existing poultry farms in Malaysia.
According to Kenanga Investment Bank Bhd (Kenanga Research), the proposed placement of 20,827,920 shares of RM0.50 each to third-party investors was expected to be completed prior to the proposed share split and free warrants issue, to be completed by the first quarter of 2011.
Assuming a five per cent discount from the five-day weighted average market price of RM5.26, the proposed placement was expected to raise gross proceeds of up to approximately RM104 million.
The research house stated that about 70 per cent of the proceeds from the private placement would go to increasing its production capacity in existing poultry farms in the country apart from developing poultry farms in Indonesia and Vietnam.
In addition, the proceeds would be utilised for QL Resources’ plantation development and oil mill construction in its 20,000-hectare plantation in Indonesia apart from development of its biomass renewable energy projects in Tawau, Sabah.
The group’s proposed share split would entail the subdivision of one existing ordinary share of RM0.50 into two shares held by entitled shareholders to increase affordability of its shares and encourage retail participation.
With regards to the group’s proposed free warrants, the research firm said it would be issued free to existing shareholders on the basis of one free warrant for every 20 existing QL Resources shares after the private placement and share split.
RHB Research Institute Sdn Bhd (RHB Research) in its research report said that it had previously highlighted the group to do a corporate exercise to raise capital as it had estimated a need for about RM250 million per annum for the financial years 2011 to 2012 (FY11 to FY12) to finance its expansion plans.
The research firm sustained a positive view on this move, stating that it would enable the group to lower its net gearing at 54 per cent by the third quarter of FY2011 against a current approximation of 60 per cent.