Priceworth signs underwriting for rights issue in FMU5 acquisition

KOTA KINABALU: Integrated timber group Priceworth International Bhd has appointed Am Investment Bank Bhd, RHB Investment Bank Bhd, and Mercury Securities Sdn Bhd as joint managing underwriters for its RM102.37 million proposed rights issue which is part of its exercise to acquire Forest Management Unit No 5 (FMU5).

“We are pleased to have the support of these financial institutions which reflects their confidence in Priceworth and its transformative acquisition of FMU5,” said executive director Richard Koo said yesterday.

“This rights issue is an important milestone for Priceworth, and we are pleased to be selected as the Principal Adviser and Joint Managing Underwriter,” said Head of Group Capital Markets, RHB Investment Bank Bhd Jaimie Sia.

FMU5 is a sustainable forest management concession covering 88,820 ha of commercial Class II forest in Sabah’s Trus Madi forest reserve. Priceworth is proposing to pay RM260 million for the timber concession area, which has been valued at RM433.8 million. The acquisition price may be further reduced to RM235 million, should Priceworth exercise a cash option it holds.

Priceworth is acquiring FMU5 through its Singapore subsidiary GSR Pte Ltd, which will also be acquiring sister company Sinora Sdn Bhd, Priceworth’s plywood manufacturing arm. The group is also planning an initial public offer (IPO) of GSR on the Singapore Exchange (SGX), and has appointed UOB Kay Hian as the principal advisor.

“With the underwriting in place, the rights issue will be the final lap of fund raising in Malaysia to degear and discharge the debentures over its assets. We are capitalising Priceworth to degear the group as a precursor to the SGX listing as part of the process to acquire FMU5,” said Koo.

“This will help to put Priceworth on a better footing.”

MIDF Amanah Investment Bank Bhd and Kenanga Investment Bank Bhd are also participating as joint underwriters, along with the three joint managing underwriters. Together, they will underwrite up to 68.8 percent, or RM70.44 million, of the proposed two-for-one rights issue priced at 5 sen for each rights share.

Priceworth will be procuring an undertaking from its substantial shareholders to subscribe in full for their portions of the remaining 31.8 percent of the rights issue, the company said. Proceeds from the rights issue will go towards reducing the group’s debts to not more than RM40 million.

The group saw its first half net profit more than triple on rising contribution from operations in FMU5, to RM4.78 million following a 32.5 percent jump in revenue to RM89.3 million. In April, Priceworth’s log production hit a new high of 32,800 cubic metres, its highest since 2011 after Sabah adopted a new sustainable forestry policy.

The timber group also signed a Memorandum of Understanding (MoU) to supply Container Flooring totaling RM600 million over a five year period averaging RM120 million per annum to Chinese manufacturer Foshan Zhengsen Woodworking Co which has been made possible due to the supply of timber from FMU 5.

For more details, please refer to the company’s announcement to Bursa Malaysia at http://www.bursamalaysia.com/market/ listed-companies/ company announcements/