London Biscuits’ cash call to raise up to RM68 million ‘unexciting’

KUCHING: London Biscuits Bhd’s ( London Biscuits) cash call to raise up to RM68 million has been viewed by analysts as ‘unexciting news’.

According to the research arm of Public Investment Bank Bhd ( PublicInvest Research), London Biscuits has proposed to undertake a 10 per cent private placement, a one-for-three renounceable rights issue with one-for- one free detachable warrants and a one-for- one bonus issue.

PublicInvest Research noted that the cash call is expected to raise a minimum of RM55.2 million to as much as RM68 million.

“Though these would support its working capital requirements and aid debt repayment purposes, we are unexcited over the news, as it illustrates that operational profits are insufficient to clear off financial commitments,” the research arm said.

“Only circa 31 per cent of the proceeds is allocated for business operations and future expansion, hence the dilutive impact seems to be larger than the interests savings or potential business enhancements.”

PublicInvest Research highlighted that based on enlarged share capital of 492.4 million, the research arm’s estimated financial year 2018 ( FY18) earnings per share ( EPS) will be diluted by circa 62 per cent to 3.9sen from 10.3sen though this will be partly mitigated by the resultant share price adjustments.

However, the research arm left its estimates unchanged at this juncture pending completion of the proposals expected to be by the fourth quarter of 2017 (4Q17).

PublicInvest Research nevertheless downgraded its call to ‘ neutral’, with a revised target price of RM0.82 per share as the research arm lowered its price earnings ( PE) multiple to eightfold its FY18F EPS due to this dilutive exercise.