The proposals are undertaken in conjunction with a proposed Sukuk issuance of RM682.5 millionas part of Dayang’s debt restructuring scheme
KUCHING: Researchers at Kenanga Investment Bank Bhd (Kenanga Research) were not surprised with Dayang Enterprise Holdings Bhd’s (Dayang) latest capital raising exercises which could dilute Dayang’s share base by approximately 20 per cent.
This comes as the oil and gas support player last week announced a capital-raising exercise entailing the proposed rights issue, on the basis of 1 right for every 10 shares (at a later-determined issue price) and proposed private placement representing approximately 10 per cent of the total issued share capital (at a later-determined issue price”).
Based on an illustrative issue price of RM0.80 per share for the rights issue, and RM1.14 per share for the private placement, the exercises are expected to raise approximately up to RM187 million – most of which will be used for debt repayments and sinking funds.
The proposals are expected to be completed by the final quarter of 2019 (4Q19).
“The proposals are undertaken in conjunction with a proposed Sukuk issuance of RM682.5 millionas part of Dayang’s debt restructuring scheme,” it said in its analysis yesterday.
“Of the sukuk proceeds raised, RM365 million will be advanced to its subsidiary, Perdana Petroleum Bhd (Perdana Petroleum) for the settlement of its borrowings, with the remaining proceeds used as a refinancing of Dayang group’s borrowings.”
In turn, Perdana Petroleum has also simultaneously announced a proposed renounceable rights issue of new redeemable convertible preference shares (RCPS), intending to raise a minimum of RM445 million, to be used for the repayment of Dayang’s advances.
“We do not find the announcements surprising given Perdana’s involvement with the Corporate Debt Restructuring Committee (CDRC) of Bank Negara, coupled with management’s repeated guidance over the past several quarters,” Kenanga Research opined.
“Based on the illustrative issue prices, the proposals are expected to dilute Dayang’s share base by approximately 20 per cent, while reducing group net borrowings by eight per cent to RM798 million, thus lowering net gearing to 0.6 times from a current 0.8 times.
This would result in approximately RM6.6 million interest savings per annumm, it estimated.
“At Perdana’s level, the RCPS is expected to dilute its share base by 2.3 to 2.5 times,depending on final issuance basis. This will also result in a massive 72 per cent reduction of its borrowings to RM178 million, thereby lowering its net gearing to 0.2 times from 1.4 times previously.”
Thus, Kenanga Research maintained its underperform call on Dayang, given a possible sentiment overhang given share base dilution following the proposed exercises.