- We maintain Hold on
Formis Resources Bhd (FRB), with an unchanged fair value of RM0.83/share, based
on an FY13F core EPS of 7.5 sen on a PE of 11x.
- It has proposed a
renounceable rights issue of up to 92.95 new redeemable convertible preference
shares (RCPS) of 10 sen each on the basis of one RCPS for every three existing shares,
at an issue price of RM1 per RCPS.
- The conversion of
each RCPS will be carried out via its surrender for a new share, with the
holders having right to do so starting from the first anniversary from the date
of issue and up to the end of the fifth year.
- FRB wants to raise
a minimum of RM62mil – pursuant to the minimum subscription of the RCPS based
solely on its existing paid-up capital of 185.9mil shares of RM1 each and excluding
the potential exercise of 92.95mil outstanding warrants (currently out-of-the
money). It expects to complete the proposal by the first quarter of 2013.
- The company says
the exercise price (now at RM1.10/warrant conversion into one share) and/or
number of the outstanding warrants may be adjusted to ensure that the status of
the holders is not prejudiced. The board will finalise and give notice of any
necessary adjustment at a later date.
- It intends to
procure undertakings from certain substantial shareholders to subscribe to
their respective RCPS entitlements and excess rights. The warrants and RCPS currently
have an anti-dilutive effect on FRB’s earnings. As such, we maintain our
forecasts for now.
- Given its gross
gearing of 0.5x, we believe the rights RCPS would allow the company to cut
borrowing cost (the RCPS carries the right to receive a cumulative preferential
dividend of 4% on the issue price) and to tide over the current challenging
economic conditions. Gearing could be lowered to 0.25x based on the minimum
subscription scenario.
- Out of the minimum
proceeds of RM62mil, nearly 90% or RM55mil would be used to repay borrowings –
which totalled RM90.9mil as at 31 March 2012. Interest savings could range between
RM3.9mil and RM6.3mil annually.
- FRB’s earnings
prospects continue to be dependent on its ability to secure private and public
technology-based projects. As at 30
June, 2012, FRB’s outstanding order book totalled RM158mil (vs. RM100mil as at
31 March 2012), and has so far in the current fiscal year secured RM75mil worth
of new jobs. In the pipeline are over RM800mil worth of jobs, spanning across
its entire business chain in distribution, networks, software, solutions and
systems.
Source: AmeSecurities
No comments:
Post a Comment