Masteel to raise up to RM81.5 million from proposed rights issue and warrants
KUALA LUMPUR: Integrated steel manufacturer Malaysia Steel Works (KL) Bhd (Masteel) announced recently that it plans to raise up to RM81.5 million from a proposed rights issue with free detachable fiveyear warrants, based on an issue price of RM0.36 per rights share.
The proposed rights issue to be undertaken would be on the basis of one rights share for every two existing Masteel shares held, on an entitlement date to be determined at a later date. Subsequently, one free detachable warrant would be issued for each rights share subscribed by shareholders.
Of the projected maximum proceeds of RM81.5 million to be raised, up to RM69 million would be utilised for working capital requirements, RM10 million for the repayment of bank borrowings, and the balance RM2.5 million to defray the estimated expenses associated with the aforementioned corporate exercise.
“We are witnessing an upcycle in steel demand within both the local and regional markets, as governments prioritise high-multiplier infrastructure developments and construction projects to stimulate economic growth,” Masteel managing director and chief executive officer Datuk Sri Tai Hean Leng said.
“This is clearly advantageous for established steel manufacturers like us who have both capacity and competitiveness to reap the benefits of this recovery.
“To this end, our recent capital expenditure investments in employing the latest steel melting technology will optimise our cost-efficiency.
“As the proposed rights issue proceeds are mainly used for working capital, it will further enhance our financial footing that will allow us to focus on enhancing our capabilities to capture new opportunities.
“Thus, the rights issue is a strong testament of confidence and commitment of the promoters and shareholders in realising the company’s growth trajectory going forward.”
In January 2020, the Ministry of International Trade and Industry (MITI) enforced the anti-dumping duty on steel products from Singapore and Turkey, which gradually alleviated the issue of steel products oversupply in the Malaysian market.
In line with these positive developments, Masteel expects to commission a third manufacturing plant in the first quarter of 2021, that would increase its productivity and expand the versatility of the group’s product range to eventually include alloy and stainless steel.
“The issuance of rights shares along with the free warrants would increase the number of Masteel shares in circulation, as well as enhance the liquidity and marketability of our shares.
“This corporate exercise provides shareholders with the option to increase their participation within the company and benefit from our future growth.”
Assuming all treasury shares are sold as at the date of the announcement, the proposed rights issue with warrants will entail the issuance of up to 226.4 million rights shares together with up to 226.4 million warrants.
Assuming the full exercise of the warrants and that all treasury shares are resold, the rights issue with warrants would expand Masteel’s share capital from RM239.9 million comprising 450.4 million shares to RM402.9 million comprising 905.5 million shares.
The warrants will have a tenure of five years commencing from the issue date of the warrants.
At an assumed exercise price of RM0.36 each, the exercise of the warrants would raise up to RM81.5 million for the group’s working capital.
The proposed exercise, which is expected to be completed in the second quarter of the calendar year 2021, is not expected to have any material effect on the earnings of the group for the financial year ending Dec 31, 2020.