Further details on the Proposals are set out in the ensuing sections.

Transcription

1 MALAYSIA STEEL WORKS (KL) BHD ( MASTEEL OR THE COMPANY ) (I) (II) PROPOSED PRIVATE PLACEMENT OF UP TO 24,450,800 NEW ORDINARY SHARES IN MASTEEL ( MASTEEL SHARE(S) OR SHARE(S) ), REPRESENTING UP TO 10% OF THE TOTAL NUMBER OF ISSUED SHARES OF MASTEEL ( PROPOSED PRIVATE PLACEMENT ); AND PROPOSED BONUS ISSUE OF UP TO 53,791,760 NEW MASTEEL SHARES ( BONUS SHARES ) ON THE BASIS OF 1 BONUS SHARE FOR EVERY 5 EXISTING MASTEEL SHARES HELD ON AN ENTITLEMENT DATE TO BE DETERMINED LATER ( PROPOSED BONUS ISSUE ) (COLLECTIVELY REFERRED TO AS THE PROPOSALS ) 1. INTRODUCTION On behalf of the Board of Directors of Masteel ( Board ), RHB Investment Bank Berhad ( RHB Investment Bank ) wishes to announce that the Company proposes to undertake the following:- (i) (ii) Proposed private placement of up to 24,450,800 Masteel Shares, representing up to 10% of the Company s total number of issued shares ( Placement Share(s) ); and Proposed bonus issue of up to 53,791,760 Bonus Shares on the basis of 1 Bonus Share for every 5 existing Masteel Shares held on an entitlement date to be determined and announced later ( Entitlement Date ). Further details on the Proposals are set out in the ensuing sections. 2. DETAILS OF THE PROPOSALS 2.1 Proposed Private Placement Size of the Proposed Private Placement As at 16 May 2017, being the latest practicable date prior to this announcement ( LPD ), the number of issued shares in Masteel is 244,508,003 Masteel Shares (of which 1,213,800 Masteel Shares are held as treasury shares). Accordingly, assuming the 1,213,800 Masteel Shares held as treasury shares are resold to the market prior to the implementation of the Proposed Private Placement, the Proposed Private Placement will involve the placement of up to 24,450,800 Placement Shares, representing up to 10% of the Company s total number of issued shares. The Proposed Private Placement will be implemented in line with the general mandate under Section 132D of the Companies Act, 1965 (which has been replaced with Sections 75 and 76 of the new Companies Act, 2016 ( Act ), which Masteel obtained from its shareholders at its annual general meeting on 29 June 2016 ( General Mandate ). Under the General Mandate, the Board is authorised to issue new Masteel Shares up to 10% of the Company s total number of issued shares. The Proposed Private Placement is expected to be implemented in multiple tranches within 6 months from the date of approval of Bursa Malaysia Securities Berhad ( Bursa Securities ) or any extended period as may be approved by Bursa Securities, subject to the General Mandate or a new mandate being obtained from shareholders of the Company under Sections 75 and 76 of the Act if the General Mandate expires before the Proposed Private Placement is fully implemented. 1

2 For the avoidance of doubt, the Proposed Private Placement will be implemented concurrently with the Proposed Bonus Issue Basis of arriving at the issue price of the Placement Shares The Board will fix the issue price of the Placement Shares at a later date, after obtaining all relevant approvals for the Proposed Private Placement. Pursuant to Paragraph 6.04(a) of the Main Market Listing Requirements of Bursa Securities ( Listing Requirements ), the Placement Shares may be issued at a discount, if any, of not more than 10% to the 5-day volume weighted average market price ( VWAP ) of Masteel Shares immediately preceding the price-fixing date. For illustration, we have assumed that the indicative issue price of the Placement Share is RM0.98 per Placement Share, which represents a discount of approximately 9.26% or RM0.10 to the 5-day VWAP of Masteel Shares up to and including the LPD of RM1.08 per Masteel Share Ranking and listing of the Placement Shares The Placement Shares will, upon allotment and issue, rank pari passu in all respects with the existing Masteel Shares, except that the Placement Shares will not be entitled to any dividend, right, allotment and/or other distribution that may be declared, made or paid where the entitlement date precedes the date of allotment and issuance of the Placement Shares. An application will be made to Bursa Securities for the listing of and quotation for the Placement Shares on the Main Market of Bursa Securities Allocation to placees The Placement Shares will be placed out to third party investors to be identified at a later date. In accordance to Paragraph 6.04(c) of the Listing Requirements, the Placement Shares will not be placed to the following parties:- (i) (ii) (iii) the interested director, interested major shareholder or interested chief executive of Masteel or a holding company of Masteel ( Interested Person(s) ); a person connected with an Interested Person; and nominee corporations, unless the names of the ultimate beneficiaries are disclosed. The Proposed Private Placement is expected to be implemented in multiple tranches within 6 months from the date of approval of Bursa Securities for the Proposed Private Placement or any extended period as may be approved by Bursa Securities, depending on the prevailing market conditions and investors interest at the point of implementation, subject to the General Mandate or upon its expiry a new general mandate being obtained from shareholders of the Company at the Company s forthcoming annual general meeting. 2

3 2.1.5 Use of proceeds Based on an indicative issue price of RM0.98 per Placement Share, the Proposed Private Placement is expected to raise an estimated gross proceeds of up to approximately RM23.96 million. The proceeds to be raised from the Proposed Private Placement are expected to be used in the following manner:- Details of use RM 000 Timeframe for use Repayment of credit facilities (1) Up to 23,782 Within 12 months from the listing of the Placement Shares Estimated expenses in relation to 180 Within 1 month from the the Proposals (2) listing of the Placement Shares Total Up to 23,962 Notes:- (1) As at 31 March 2017, the Group s total borrowings are approximately RM million. For illustration, the repayment of the Group s borrowings of RM23.78 million, based on the effective interest rate of 5.00% per annum, is expected to result in interest cost savings of approximately RM1.19 million a year. (2) Comprising of professional fees, placement fees, regulatory fees and other incidental expenses in relation to the Proposals. If the actual expenses are above the budgeted amount, the deficit will be funded out of the portion allocated for repayment of credit facilities. Conversely, if the actual expenses are below the budgeted amount, the excess will be used for the repayment of credit facilities. The actual proceeds to be raised from the Proposed Private Placement are dependent on the issue price and actual number of Placement Shares to be issued. If the actual amount varies from the above estimate, the excess or deficit, as the case may be, would be reallocated to or from the amount earmarked for repayment of credit facilities. 2.2 Proposed Bonus Issue Basis and number of Bonus Shares The Proposed Bonus Issue will entail an issuance of up to 53,791,760 Bonus Shares, to be credited as fully paid-up, on the basis of 1 Bonus Share for every 5 existing Masteel Shares held by the shareholders of Masteel whose names appear in the Record of Depositors of Masteel as at the close of business on the Entitlement Date. Based on the Company s total number of issued shares of 244,508,003 as at the LPD (including 1,213,800 Masteel Shares held as treasury shares) and assuming all treasury shares are resold and all Placement Shares are issued to third party investors prior to the implementation of the Proposed Bonus Issue, a maximum of 53,791,760 Bonus Shares may be issued pursuant to the Proposed Bonus Issue. The actual number of Bonus Shares to be issued will be based on the then number of issued Masteel Shares (less any Masteel Shares retained as treasury shares), which will include any Placement Shares issued as at the Entitlement Date. Please refer to Section 4.1 below for an illustration of the Bonus Shares to be issued under the Proposed Bonus Issue. The Proposed Bonus Issue will not be implemented in stages. 3

4 Fractional entitlements arising from the Proposed Bonus Issue, if any, shall be dealt with in such manner as the Board shall in their absolute discretion deem fit and expedient in the best interest of the Company Capitalisation of reserves The Proposed Bonus Issue shall be wholly capitalised from the share premium account of Masteel at RM0.50 per Bonus Share, being the reference to the par value of Masteel Share immediately before the effective date of the Act, pursuant to Section 618(7) of the Act. Based on the Company s latest audited financial statement for the financial year ended ( FYE ) 31 December 2016 and the latest unaudited financial statement for the financial period ended ( FPE ) 31 March 2017, the pro forma effect of the Proposed Bonus Issue on the share premium account of Masteel is illustrated below based on the following scenarios:- Minimum Scenario : Assuming all the existing 1,213,800 treasury shares are retained in the Company and no Placement Shares are issued prior to the implementation of the Proposed Bonus Issue. Maximum Scenario : Assuming all the existing 1,213,800 treasury shares are resold to the market and all Placement Shares are issued to prior to the Entitlement Date of the Proposed Bonus Issue. Company level Audited as at 31 December 2016 (RM 000) Minimum Scenario Maximum Scenario Unaudited as at 31 March 2017 (RM 000) Minimum Scenario Maximum Scenario Share premium* 78,204 78,204 78,204 78,204 Less:- - Amount to be capitalised for the Proposed Bonus Issue Balance after the Proposed Bonus Issue (24,329) (26,896) (24,329) (26,896) 53,875 51,308 53,875 51,308 Note:- * Under the no par value regime of the Act which came into effect on 31 January 2017, the concept of share premium will no longer be applicable and any amount standing to the credit of the Company s share premium account shall be consolidated as part of its share capital. However, Section 618(4) of the Act provides that the Company may use its share premium account to fully pay up the Bonus Shares within a 24 months period from 31 January The Board confirms that the Company has adequate reserves available for the capitalisation of the Bonus Shares and such reserves are unimpaired by losses on a consolidated basis, based on the latest audited consolidated financial statements of the Company for the FYE 31 December 2016 and the FPE 31 March

5 2.2.3 Ranking of the Bonus Shares The Bonus Shares will, upon allotment and issuance, rank pari passu in all respects with the existing Masteel Shares, except that the Bonus Shares will not be entitled to any dividends, rights, allotments and/or other distributions that may be declared, made or paid where the entitlement date precedes the date of allotment and issuance of the Bonus Shares Listing of and quotation for the Bonus Shares An application will be made for the listing of and quotation for the Bonus Shares on the Main Market of Bursa Securities. 3. RATIONALE AND JUSTIFICATION FOR THE PROPOSALS 3.1 Proposed Private Placement The Proposed Private Placement will enable the Company to raise funds as and when required and will supplement the funds for working capital of the Company. In addition, the Proposed Private Placement will reduce the reliance on short-term borrowings, thus allowing the Company to save on interest expense. 3.2 Proposed Bonus Issue The Proposed Bonus Issue aims to reward the existing shareholders of the Company for their loyalty and continuing support, by enabling them to have a greater participation in the equity of the Company in terms of the increased number of shares held, whilst maintaining their percentage of equity interest. In addition, the Proposed Bonus Issue will increase the capital base of the Company to a level which will better reflect the current scale of operations of Masteel Group and potentially improve the liquidity and marketability of Masteel Shares on Bursa Securities. 4. EFFECTS OF THE PROPOSALS 4.1 Share capital For illustration, the pro forma effects of the Proposals on the share capital of Masteel are as follows:- Minimum Scenario No. of Shares ( 000) (RM 000) Maximum Scenario No. of Shares ( 000) (RM 000) Share capital as at the LPD 244, , , ,254 Less: Treasury shares (1,214) (607) , , , ,254 Placement Shares to be issued (1) - (1) - 24,451 (2) 23, , , , ,216 Bonus Shares to be issued 48,659 24,329 53,792 26,896 Enlarged share capital 291, , , ,112 5

6 Notes:- (1) Assuming none of the Placement Shares was issued. (2) Assuming all 24,450,800 Placement Shares are issued at an illustrative indicative issue price of RM0.98 per Placement Share and the amount is fully credited to the share capital account in accordance with the Act. 4.2 Net assets ( NA ) per Share and gearing Based on the audited consolidated financial statements of Masteel as at 31 December 2016, the pro forma effects of the Proposals on the NA per Share and gearing of Masteel Group are as follows:- Minimum Scenario Pro forma I Pro forma II Share capital 122,254 Audited as at 31 December 2016 After the Proposed Private Placement After the Proposed Bonus Issue (RM 000) (RM 000) (RM 000) Share premium 78,204 78,204 (1) 122, ,583 (2)(3) 53,695 Treasury shares (897) (897) (897) Retained profits 351, , ,406 Total equity / NA 550, , ,787 No. of Shares issued (excluding treasury shares) 243, , ,953 NA per Share (RM) Total borrowings 361, , ,138 Gearing (times) Notes:- (1) Assuming all 1,213,800 treasury shares are retained by the Company and no Placement Shares are issued. (2) After deducting the amount to be capitalised for the Proposed Bonus Issue. (3) After adjusting for the estimated expenses of RM180,000 for the Proposals. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 6

7 Maximum Scenario Pro forma I Pro forma II Share capital 122,254 Assuming the resale of treasury Audited as at 31 December 2016 shares and after the Proposed Private Placement After the Proposed Bonus Issue (RM 000) (RM 000) (RM 000) Share premium 78,204 78,204 Capital reserves account - (2) 146, ,112 (5)(6) 51,128 (3) Treasury shares (897) - - Retained profits 351, , ,406 Total equity / NA 550, , ,060 No. of Shares issued (1) 243, , ,751 NA per Share (RM) Total borrowings 361,138 (4) 337, ,356 Gearing (times) Notes: (1) Excluding 1,213,800 treasury shares. (2) Assuming all 24,450,800 Placement Shares are placed out at an indicative issue price of RM0.98 per Placement Share. (3) Gain of approximately RM0.41 million, assuming the 1,213,800 treasury shares which were purchased at a cost of approximately RM0.90 million are resold at RM1.08, being the 5-day VWAP of Masteel Shares up to the LPD. (4) After deducting the repayment of bank borrowings of RM23.78 million. (5) After deducting the amount to be capitalised for the Proposed Bonus Issue. (6) After adjusting for the estimated expenses of RM180,000 for the Proposals. 4.3 Earnings and earnings per share ( EPS ) The Proposals are not expected to have any material effect on the earnings of Masteel Group for the FYE 31 December However, there will be a corresponding dilution in the EPS of Masteel Group as a result of the increase in the number of shares issued under the Proposals. Nevertheless, the Proposed Private Placement is expected to contribute positively to the future earnings of the Group for the ensuing financial years when the benefits of utilisation of proceeds are realised. 7

8 4.4 Substantial shareholders shareholdings The effects of the Proposals on the shareholdings of the substantial shareholders of Masteel as at the LPD are as follows:- Minimum Scenario Substantial shareholders Pro forma I Pro forma II Shareholdings as at the LPD After the Proposed Private Placement (4) After the Proposed Bonus Issue Direct Indirect Direct Indirect Direct Indirect No. of Shares (1) % No. of Shares (1) % No. of Shares % No. of Shares % No. of Shares % No. of Shares % TTY Resources Sdn Bhd 75,276, ,276, ,331, Dato Sri Tai Hean Leng - - (2) 90,331,462 Tek Hean Leng Datin Ng Pik Lian - - (3) 81,835, (3) 81,835, (3) 98,203, Tay Kwok Peng - - (2) 90,331, (Administrator of the Estate of Tai Chet Siang) Notes:- (1) Excluding a total of 1,213,800 Masteel Shares bought-back by the Company and retained as treasury shares as at the LPD. (2) Deemed interested pursuant to Section 8 of the Act, by virtue of his interests in TYY Resources Sdn Bhd. (3) Deemed interested pursuant to Section 8 of the Act, by virtue of her interests in TYY Resources Sdn Bhd and Kemajuan Rekacekap Sdn Bhd. (4) Assuming all the existing 1,213,800 treasury shares are retained in the Company and no Placement Shares are issued. 8

9 Maximum Scenario Pro forma I Pro forma II Assuming the resale of treasury shares and After the Proposed Bonus Issue Shareholdings as at the LPD after the Proposed Private Placement (4) Substantial Direct Indirect Direct Indirect Direct Indirect shareholders No. of Shares (1) % No. of Shares (1) % No. of Shares % No. of Shares % No. of Shares % No. of Shares % TTY Resources Sdn Bhd 75,276, ,276, ,331, Dato Sri Tai Hean Leng - - (2) 75,276, (2) 90,331,462 Tek Hean Leng Datin Ng Pik Lian - - (3) 81,835, (3) 81,835, (3) 98,203, Tay Kwok Peng - - (2) 75,276, (2) 90,331, (Administrator of the Estate of Tai Chet Siang) Notes:- (1) Excluding a total of 1,213,800 Masteel Shares bought-back by the Company and retained as treasury shares as at the LPD. (2) Deemed interested pursuant to Section 8 of the Act, by virtue of his interests in TYY Resources Sdn Bhd. (3) Deemed interested pursuant to Section 8 of the Act, by virtue of her interests in TYY Resources Sdn Bhd and Kemajuan Rekacekap Sdn Bhd. (4) Assuming all 1,213,800 treasury shares are resold to the market and all 24,450,800 Placement Shares are issued. 4.5 Convertible securities As at the LPD, there are no options, warrants or convertible securities issued by the Company. 9

10 5. APPROVALS REQUIRED The Proposals are subject to the following approvals:- (i) (ii) (iii) Bursa Securities, for the listing of and quotation for the Placement Shares and Bonus Shares on the Main Market of Bursa Securities; the shareholders of Masteel for the Proposed Bonus Issue at an extraordinary general meeting to be convened; and any other relevant authorities and/or parties, if required. The Proposals are not inter-conditional upon each other and are not conditional upon any other corporate exercise undertaken or to be undertaken by the Company. 6. INTEREST OF DIRECTORS AND MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the directors, major shareholders of Masteel and/or persons connected to them have any interest, whether direct or indirect, in the Proposed Private Placement and Proposed Bonus Issue, save for their respective entitlements as shareholders of the Company under the Proposed Bonus Issue, which are also available to all other shareholders of the Company. 7. DIRECTORS STATEMENT After considering all aspects of the Proposals, the Board is of the opinion that the Proposals are in the best interest of the Company. 8. ADVISER RHB Investment Bank has been appointed by the Company to act as the Adviser for the Proposals. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Board expects the Proposals to be completed by the third quarter of APPLICATION TO RELEVANT AUTHORITIES Barring any unforeseen circumstances, the applications to the relevant authorities for the Proposals are expected to be submitted within 1 month from the date of this announcement. This announcement is dated 25 May