PROPOSED PRIVATE PLACEMENT OF UP TO 10% OF THE ISSUED SHARES IN CHIN HIN

Transcription

1 CHIN HIN GROUP BERHAD ( CHIN HIN OR THE COMPANY ) PROPOSED PRIVATE PLACEMENT OF UP TO 10% OF THE ISSUED SHARES IN CHIN HIN 1. INTRODUCTION On behalf of the Board of Directors of Chin Hin ( Board ), M&A Securities Sdn Bhd ( M&A Securities ) wishes to announce that the Company proposes to undertake private placement of up to 10% of the issued shares of Chin Hin ( Proposed Private Placement ). The Proposed Private Placement will be undertaken in accordance with the general mandate pursuant to Sections 75 and 76 of the Companies Act, 2016 ( Act ) obtained from the shareholders of the Company at its third (3 rd ) Annual General Meeting ( AGM ) convened on 25 May 2017, whereby the Board had been authorised to allot and issue new ordinary shares in Chin Hin ( Chin Hin Shares or Shares ) not exceeding 10% of the issued shares of the Company ( Shareholders Mandate ). Further details of the Proposed Private Placement are set out in the ensuing sections. 2. DETAILS OF THE PROPOSED PRIVATE PLACEMENT As at 1 June 2017, being the last practicable date preceding the date of this announcement ( LPD ), the existing issued shares of Chin Hin is RM252,944,000 comprising 505,888,000 Chin Hin Shares. As such, the Proposed Private Placement will entail the issuance of up to 50,588,800 new Chin Hin Shares ( Placement Share(s) ) representing not more than 10% of the issued shares of the Company, at an issue price to be determined and announced at a later date. The actual number of Chin Hin Shares to be issued pursuant to the Proposed Private Placement will be determined at a later date, after obtaining the relevant approvals. Subject to the prevailing market conditions, the Proposed Private Placement may be implemented in multiple tranches, if required, within six (6) months from the date of approval of Bursa Malaysia Securities Berhad ( Bursa Securities ) for the Proposed Private Placement (depending on investors interest at the point of implementation) or any extended period as may be approved by Bursa Securities, until the conclusion of the next AGM of the Company and provided that the Company must not issue the Placement Shares if the Placement Shares when aggregated with the nominal value of Chin Hin Shares or convertible securities issued during the preceding twelve (12) months, exceeds 10% of issued share capital of Chin Hin (excluding treasury shares). As such, there could potentially be several price fixing dates depending on the number of tranches and timing of implementation. 2.1 Basis of arriving at the issue price of the Placement Shares The issue price of each tranche of the Placement Shares, where applicable, shall be determined separately and fixed by the Board at a later date after obtaining the relevant approvals for the Proposed Private Placement. The Board will take into consideration amongst others, the prevailing market conditions and the provisions of Paragraph 6.04 of the Main Market Listing Requirements of Bursa Securities ( MMLR ), in determining the issue price of the Placement Shares at a discount of not more than 10% to the volume weighted average market price ( VWAMP ) of Chin Hin Shares for the five (5) market days immediately preceding the price fixing date(s). For illustrative purposes, assuming the Placement Shares are issued at an indicative issue price of RM1.21 per Placement Share ( Indicative Issue Price ) based on an approximate 9.02% discount to the VWAMP of Chin Hin Shares for the five (5) market days up to 5 June 2017 of 1

2 RM1.33 per Placement Share, the Proposed Private Placement is expected to raise gross proceeds of up to approximately RM61,212,448. The mechanism to determine the issue price of the Placement Shares is in accordance with market based principles. 2.2 Placement arrangement The Placement Shares are proposed to be placed to independent investor(s) ( Placee(s) ) to be identified at a later date. In accordance with Paragraph 6.04(c) of the MMLR, the Placement Shares will not be placed to the following parties:- (b) the interested director, interested major shareholder or interested chief executive of Chin Hin or a holding company of Chin Hin (if applicable), or interested person(s) connected with such director, major shareholder or chief executive; and nominee corporations, unless the names of the ultimate beneficiaries are disclosed. Additionally, Placees shall also be person(s) or party(ies) who/which qualify under Schedules 6 and 7 of the Capital Markets and Services Act, Ranking of the Placement Shares The Placement Shares shall, upon issuance and allotment, rank equally in all respects with the then existing issued Chin Hin Shares, save and except that the holders of the Placement Shares shall not be entitled to any dividends, rights, allotments and/or other forms of distributions that may be declared, made or paid to the shareholders of the Company, for which the relevant entitlement date precedes the date of issuance and allotment of the Placement Shares. 2.4 Listing of and quotation for the Placement Shares Chin Hin shall make an application to Bursa Securities for the listing of and quotation for the Placement Shares to be issued pursuant to the Proposed Private Placement on the Main Market of Bursa Securities. The remaining of this page is intentionally left blank 2

3 2.5 Utilisation of proceeds For illustration purposes, based on the proposed placement size of up to 50,588,800 Placement Shares and assuming the Placement Shares are issued at an indicative issue price of RM1.21 per Placement Share, the Proposed Private Placement is expected to raise gross proceeds of up to RM61,212,448. The proceeds raised are expected to be utilised in the following manner:- Details Notes Expected time frame for utilisation of proceeds (from listing date of Placement Shares) Construction of new manufacturing and operation facility of 12,000 Within eighteen (18) months G-Cast Concrete Sdn Bhd ( GCCSB ) in Kota Tinggi, Johor Expansion of existing manufacturing facilities and purchase of 6,200 (b) Within twelve (12) months new equipment and machineries of GCCSB in Rawang, Selangor Expansion of existing manufacturing facilities, purchase of new 2,692 (c) Within twelve (12) months equipment and machineries of MI Polymer Concrete Pipes Sdn Bhd ( MIPCP ) in Batu Pahat, Johor as well as undertaking related product testing, certification and related works for its products Repayment of bank borrowings 23,600 (d) Within six (6) months Future expansion plans 10,000 (e) Within twenty four (24) months Working capital purposes 5,320 (f) Within six (6) months Estimated expenses for the Proposed Private Placement 1,400 (g) Within one (1) month Total estimated proceeds 61,212 Notes:- GCCSB, a wholly-owned subsidiary of the Company, intends to construct a new manufacturing and operation facility on a piece of freehold vacant land located at Mukim of Kota Tinggi, Daerah Kota Tinggi, Johor ( Land ), which it had acquired in September This new manufacturing and operation facility shall house two (2) single storey demoulding shed factory and a main production building, manufacturing plant and a concrete batching plant, with a total built-up area of 30,000 square feet. The new manufacturing and operation facility shall cater to GCCSB s business growth in the southern region of Malaysia as well as to expand GCCSB s overall manufacturing capacities for the manufacturing of precast concrete products business segment. It is expected that the construction of the new manufacturing and operation facility will be completed within eighteen (18) months from the date of the listing of the Placement Shares on the Main Market of Bursa Securities. The estimated cost of construction of this new manufacturing and operation facility is expected to amount to RM4.0 million, which will be fully funded by the proceeds raised from the Proposed Private Placement. The new manufacturing plant shall also be fully-automated and equipped with various machineries and equipment, such as pipe machineries, travelling hopper system, gantry cranes and caging machines to support the production of precast concrete products. In addition, additional moulds shall be installed to support the daily casting capacity of the precast concrete products. GCCSB also intends to build a concrete batching plant to produce more concrete to support the production of precast concrete products at this manufacturing and operation facility. In this respect, GCCSB intends to purchase additional machineries and equipment at a total cost of approximately RM8.0 million, to be utilised in the following manner:- 3

4 Details Pipe machineries 900 Overhead crane and gantry cranes, electric cable and railway beams 2,110 Travelling hopper system including steel structure 700 Caging machinery 200 Moulds 2,000 Batching plant 600 Other machineries and equipment (e.g. motor vehicles, lab equipment, 1,490 shovel, test frames, auto feeders, weightbridge) Total 8,000 Upon completion, the expected overall production capacity at the new manufacturing and operation facility shall be approximately 60,000 metric tonne ( mt ) per annum. (b) The Company has earmarked approximately RM5.2 million for the expansion and installation of additional equipment and machineries at GCCSB s manufacturing facility located at Lot PT 11040, Mukim Serendah, Daerah Hulu Selangor, Selangor Darul Ehsan, which has been operating since January The details of the additional equipment and machineries to be purchased are as follows:- Details Overhead crane/gantry cranes, electric cable and railway beams 4,900 Caging machinery 200 Test frame 80 Moulds 20 Total 5,200 In addition, GCCSB shall also expand the manufacturing floor space from 200,376 square feet to 601,128 square feet at an estimated cost of RM1.0 million to expand its existing manufacturing space which includes construction of main building, earthworks, piling works, utility related works and installation of fire fighting equipment. The above initiatives are expected to increase GCCSB s production capacity from 60,000 mt per annum to 144,000 mt per annum. The expansion activities is expected to begin in the third quarter of 2017 and expected to be completed during the third quarter of With the increase in production capacity, GCCSB will be able to cater to the anticipated continued increase in sales and order book of precast concrete products by its customers. (c) On 7 April 2017, Starken AAC Sdn Bhd had completed the acquisition of the entire issued and paid up share capital of MIPCP for a total cash consideration of RM35.0 million. MIPCP is principally involved in the manufacturing and supply of pipes. The Company has earmarked approximately RM2.1 million for the expansion of the existing manufacturing facility operated by MIPCP located at HSD 56274, PTD 47840, Mukim Simpang Kanan, Batu Pahat, Johor, which includes the following:- (i) Construction of additional infrastructures and facilities to support the production activities at its manufacturing facility, which includes construction of steel structures, earthworks, piling works, utility related works and installation of fire fighting equipment. The total estimated cost is approximately RM0.47 million; and 4

5 (ii) purchase of additional equipment and machineries, the details of which are as follows:- Details Cranes 150 Casting machineries and its related equipment 725 Other machineries and equipment (e.g. steel resin tanks, air 451 compressors, shearing cutting machine, roller machineries, conveyors, vibration motors, mould ejecting machineries, mild steel mandrel, clear glass etc) Moulds 106 Motor vehicles (e.g. forklifts, lorries, etc) 220 Total 1,652 In addition to the above, MIPCP is required to undertake mandatory product testing, certification and related works on the different pipes of different sizes manufactured and supplied by MIPCP at a total estimated cost of RM0.57 million. These products shall undergo testing conducted by the Scientific and Industrial Research Institute of Malaysia ( SIRIM ) to obtain the BSEN certification as well as undergo other related testing at laboratories and facilities in Singapore. Once the relevant certifications have been obtained, Suruhanjaya Perkhidmatan Air Negara shall grant the relevant approval for the pipes to be supplied for use in sewerage works in Malaysia. The above initiatives are expected to increase MIPCP s production capacity from 20,000 mt per annum to 40,000 mt per annum. Upon completion of the above expansion, testing and certification plans, MIPCP will be able to cater to the anticipated increase in sales and order books of various pipes by its customers in Singapore, Malaysia and other neighbouring countries. The expansion activities is expected to begin in the third quarter of 2017 and expected to be completed during the first half of (d) Repayment of bank borrowings The Company intends to utilise the proceeds of RM23.6 million to pare down and reduce the utilisation of its bankers acceptance facilities. The interest rates and the tenure of the bankers acceptances are set out below:- Banking facility Tenure Interest rate (% per annum)/ Maturity/ Duration Amount outstanding as at 1 June 2017 Proposed repayment Purpose of borrowing Bankers acceptances 30 to 120 days 3.86% to 4.49%/ 1 to 4 months as at 1 June ,957 23,600 To finance working capital The Company has utilised bankers acceptance facilities from various financial institutions in Malaysia. The Company will repay the bankers acceptances as and when it falls due and as such is unable to determine which bankers acceptance to repay at this juncture as it depends on the timing of the receipt of the proceeds from the Proposed Private Placement and the maturity date of the bankers acceptances at that point in time. 5

6 The proposed repayment will reduce the Chin Hin and its subsidiaries ( Chin Hin Group or Group ) overall gearing level from 1.00 to 0.79 times as set out in Section 4.2 of this announcement and result in an expected annual interest savings of approximately RM0.98 million per annum, assuming the effective interest rate of 4.14% per annum, which was arrived at based on the average interest rate charged, amount of bank borrowings undertaken and repayment period. However, the actual interest savings may vary depending on the then applicable interest rate. (e) Working capital RM5.32 million has been earmarked for working capital to finance the Group s purchases of raw materials and day-to-day operating expenses for the following business segments:- (i) Manufacturing of precast concrete products (cement, sand, lime powder, aluminium, gypsum, resin, catalyst and stainless steel sleeve) 2,500 (ii) Manufacturing of Autoclaved Aerated Concrete ( AAC ) products 2,820 (cement, sand, aggregates, admixture, hard drawn wire, steel bars and steel collars) Total 5,320 (f) Future expansion plans The Company intends to widen and complement the range of building materials and products it currently distributes, especially its in-house manufactured products, namely ready-mixed concrete and manufacturing of AAC and precast concrete products, wire mesh and metal roofing systems. To meet this objective, the Company proposes to utilise up to RM10.0 million of the proceeds to be raised from the Proposed Private Placement for future business projects/investments. As at the date of this announcement, the new business projects/investments has not been determined. The Company shall make the requisite announcement, if required by the MMLR, as and when the new business projects/investments are confirmed. (g) This includes payment of fees to the relevant authorities, advisory and placement fees. If the actual expenses are higher than the amount budgeted, the deficit will be funded out of the working capital. Conversely, if the actual expenses are lower than the amount budgeted, the excess will be utilised for the working capital. The actual proceeds to be raised from the Proposed Private Placement are dependent on the issue price of the Placement Shares and actual number of Placement Shares issued. Any excess or shortfall of the actual proceeds raised will be adjusted against the utilisation for the working capital of the Group. Pending the full utilisation of the proceeds raised from the Proposed Private Placement, the Company intends to place these proceeds (including accrued interest, if any) or the balance thereof in interest-bearing deposit accounts with licensed financial institution(s) or in short-term money market instruments. The interest derived from the deposits with financial institutions or any gains arising from the short-term money market instruments will be used as additional working capital of the Group. 6

7 3. RATIONALE The Proposed Private Placement will allow the Group to raise the necessary funding for purposes set out under Section 2.5 above. The Board is of the opinion that the Proposed Private Placement is the most cost-effective source of capital to meet the Group s funding needs in the short-term and the most expeditious way of fund raising from the capital market as opposed to other forms of fund raising, as the Company has procured the Shareholders Mandate. 4. EFFECTS OF THE PROPOSED PRIVATE PLACEMENT 4.1 Share capital The pro forma effects of the Proposed Private Placement on the share capital of Chin Hin are as follows:- No. of shares RM Share capital as at the LPD 505,888, ,944,000 To be issued pursuant to the Proposed Private Placement 50,588,800 61,212,448 Enlarged share capital 556,476, ,156,448 Note:- Based on the Indicative Issue Price. 4.2 Net assets ( NA ) and gearing The pro forma effects of the Proposed Private Placement on the consolidated NA per Chin Hin Share and gearing of the Group based on the latest audited consolidated financial statement of the Group as at 31 December 2016 and assuming the Placement Shares are issued at the Indicative Issue Price, are as follows:- Audited as at 31 December 2016 After the Proposed Private Placement Share capital 252, ,156 Share premium 7,656 7,656 Merger reserve (153,192) (153,192) Foreign currency translation reserve Revaluation reserve 8,768 8,768 Retained earnings 207,592 (b) 206,192 Shareholders fund/na 324, ,125 Number of shares in issue ( 000) 505, ,477 NA per ordinary share (RM) Borrowings (interest-bearing) () 325,604 (c) 302,004 Gearing ratio (times)

8 Notes:- (b) (c) Based on the Indicative Issue Price. After adjusting for the estimated expenses relating to the Proposed Private Placement of approximately RM1.4 million. Upon repayment of bank borrowings of RM23.6 million. 4.3 Earnings and earnings per share ( EPS ) The utilisation of proceeds from the Proposed Private Placement is expected to be earnings accretive as it shall be primarily utilised to finance the funding requirements of the Group, as stated in Section 2.5 above. The Proposed Private Placement is expected to contribute positively to the earnings of the Group for the financial year ending 31 December 2017 and for the future years as and when the benefits of the utilisation of proceeds are realised. The EPS of the Group will however be proportionately diluted as a result of the increase in the number of shares after the Proposed Private Placement. 4.4 Dividends The Proposed Private Placement will not have any effect on the dividend policy of the Company, if any. Future dividends to be declared by the Company will be dependent on, inter-alia the future financial performance as well as cash position of the Group, after taking into consideration the working capital requirements, capital expenditures need for future growth and business expansion. 4.5 Convertible Securities The Company does not have any other existing convertible securities as at the LPD. The remaining of this page is intentionally left blank 8

9 - 4.6 Substantial shareholders shareholding The pro forma effects of the Proposed Private Placement on the shareholding of the substantial shareholders of Chin Hin based on the Company s Register of Substantial Shareholders as at 1 June 2017 are set out in the table below:- Substantial shareholders As at 1 June 2017 After the Proposed Private Placement <------Direct------> <------Indirect------> <------Direct------> <------Indirect------> No. of Shares No. of Shares No. of Shares No. of Shares ( 000) % ( 000) % ( 000) % ( 000) % Datuk Chiau Beng Teik 52, , , , Datin Seri Wong Mee Leng , , Chiau Haw Choon 1, , , , PP Chin Hin Realty Sdn Bhd - - (b) 282, (b) 282, Divine Inventions Sdn Bhd 282, , Notes:- (b) Deemed interest by virtue of his/her substantial interest in PP Chin Hin Realty Sdn Bhd pursuant to Section 8(4) of the Act. Deemed interest by virtue of its substantial interest in Divine Inventions Sdn Bhd pursuant to Section 8(4) of the Act. The remaining of this page is intentionally left blank 9

10 5. APPROVALS REQUIRED The Proposed Private Placement is subject to the approvals being obtained from the following:- (b) Bursa Securities, for the listing of and quotation for the Placement Shares on the Main Market of Bursa Securities; and Any other relevant persons or authorities, if required. Approval has been obtained from the shareholders of Chin Hin at the AGM convened on 25 May 2017 authorising the Board to allot and issue new Chin Hin Shares not exceeding 10% of the issued shares in the Company pursuant to Sections 75 and 76 of the Act. The approval is valid, unless revoked or varied by the Company at a general meeting, until the conclusion of the next AGM of Chin Hin. Therefore, the Proposed Private Placement does not require another specific approval from the shareholders of Chin Hin. The Proposed Private Placement is not conditional upon any other corporate proposals undertaken or to be undertaken by Chin Hin. 6. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM None of the Directors and/or major shareholders of Chin Hin and/or persons connected with them have any interest, whether direct or indirect, in the Proposed Private Placement. 7. DIRECTORS RECOMMENDATION The Board, after having considered all aspects of the Proposed Private Placement (including, but not limited to the rationale as set out in Section 3 and the effects as set out in Section 4 of this announcement), is of the opinion that the Proposed Private Placement is in the best interest of the Group and its shareholders. 8. ADVISER AND PLACEMENT AGENT M&A Securities has been appointed as the Adviser and Placement Agent to the Company for the Proposed Private Placement. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring unforeseen circumstances, the application to Bursa Securities in relation to the Proposed Private Placement is expected to be made within one (1) month from the date of this announcement. The Proposed Private Placement is expected to be completed by the third quarter of This announcement is dated 6 June