12 July 2012
Timber producer Jaya Tiasa Holdings Bhd plans to raise RM332.15mil from a proposed share placement exercise, of which RM225.85mil will be used to build palm oil mills, about RM100mil would be used to repay its borrowings, issue price for the placement of 42.04 million shares has been fixed at RM7.90 per placement share
Timber producer Jaya Tiasa Holdings Bhd plans to raise RM332.15mil from a proposed share placement exercise, of which RM225.85mil will be used to build palm oil mills.
The company said in an announcement to Bursa Malaysia that the book-building exercise for the placement of 42.04 million shares, or 15% of its paid-up capital, had been completed.
“The issue price for the placement shares has been fixed at RM7.90 per placement share,” it said, adding that this was about 11% below the five-day volume weighted average market price up to Tuesday prior to the price-fixing date of RM8.87.
Jaya Tiasa said that of the RM332.15mil, about RM100mil would be used to repay its borrowings and the remaining RM6.30mil would be used for estimated expenses for the placement and bonus issue.
Analysts, although not overly excited about the development, agreed that the share placement was a necessary move by the company.
“It's a neutral move. I won't say it's positive or negative but it is necessary to reduce their gearing,” said an analyst, who pointed out that Jaya Tiasa was allocating a portion of the proceeds from the share placement exercise to repay its borrowings.
For its financial year ended April 30, 2012, Jaya Tiasa's loans and borrowings stood at RM658.34mil. Total liabilities were at RM1.16bil.
Another analyst said it was the right move at the right time to raids funds.
“They're aggressively expanding their working capital, so the funds are necessary for them.”
Jaya Tiasa recorded a lower pre-tax profit of RM38.90mil for the three-month financial period ended April 30, 2012 compared with RM72.84mil in the same period of 2011.
The company, which changed its financial year end from April 30 to June 30, said in filing with the stock exchange last month that its revenue for the period was higher at RM274.54mil compared with RM255.52mil previously. It attributed the growth to significant increase in log sales volume.
According to the company, net profit was however lower due to fall in logs, fresh fruit bunches (FFB) and crude palm oil average selling price, as well as a reduction in plywood sales volume.
The analyst said the timber sector would likely remain flat, going forward, in light of tighter log supply and the anticipated increase in demand for wood products from Japan, which is undergoing reconstruction efforts.
“We expect better growth in the oil palm sector, spurred by an increase in FFB production, going forward. The construction of the palm oil mills is timely in light of this,” he said.