VS Industry to inject RM25.27 mln into HK operations to fund expansion

KUCHING: VS Industry Bhd (VS Industry) has agreed to inject RM25.27 million into its 43.5 per cent owned Hong Kong-listed subsidiary, VS International Group Ltd (VSIG), via a one-for-four rights issue to fund its expansion plans in China.

The proposed rights issue by VSIG has a fixed subscription price of HK$0.23 per rights share, and is expected to raise between HK$105.8 million (RM58.1 million) and HK$ 114.5 million ( RM62.8 million).

In a statement on Bursa from Thursday, VS Industry announced that they had agreed to subscribe for the full 200,021,992 rights shares that will be provisionally allotted to them under the rights issue, and would be entirely funded via borrowing from financial institutions.

Despite this being the case, the research arm of Public Investment Bank Bhd (PublicInvest Research) noted that the group would have no issue using internally generated funds given its huge RM301.2 million cash piles as of April 30, 2017.

Additionally, the statement also detailed that VS Industry has also entered into an underwriting agreement with VSIG on July 19 to act as the underwriter for the rights issue exercise – conditionally agreeing to fully underwrite not less than 215,231,119 rights shares and not more than 253,171,433 rights shares.

On the whole, PublicInvest Research hailed the move as ‘positive’ step for the group as it would provide them an opportunity to increase its shareholding in VSIG who are anticipated to set record stronger growth numbers ahead.

“VISG is reportedly in discussions to secure multiple large contracts from new customers, hence this exercise in preparation for the potential likelihood,” guided the research arm.

According to a statement from VISG, proceeds of the share exercise have been earmarked by VSIG to enhance their operations in Zhuhai, Guangdong, which includes expansion of its production capacity and storage capacity; and enhancement of its production efficiency to negate some of the impacts from rising wages.

HK$ 35 million has been earmarked as repayment of short term bank borrowings that were previously drawn to fund new warehouses and general working capital; HK$9 million for funding a new dual lane Surface Mount Technology assembly line; HK$12 million for funding of a new high tonnage injection machineries; HK$ 23 million for funding of automated equipment; and the remaining balance as general working capital.