Still growing. Kimlun has proposed a rights issue with
free warrants to fund its growing working capital requirement, given
its ballooning outstanding orderbook (+30% YoY) and the progress of its
property developments. Post-rights, we estimate a 20% dilution to
FY14-15 EPS but there will still be EPS growths of 7% and 10% in FY14-15
respectively. Additionally, the valuation will remain undemanding at
10x FY15 EPS, compared to big cap peers’ 15x. We maintain our forecasts,
BUY rating and TP of MYR2.38 (10x 2014 PER) for now.
Rights issue with warrants. Kimlun has proposed a renounceable issue of 60m rights shares on the basis of 1 rights share-for-4 existing shares. The indicative price for the rights is MYR1.10, representing a c.38% discount to the theoretical ex-rights price of MYR1.77 (based on the 5-day WAMP). Additionally, the rights will be issued together with 60m free detachable warrants on the basis of 1 warrant-for-1 rights share, with an indicative exercise price of MYR1.77 and tenure of 10 years. The proposed exercise is expected to complete in 1Q14.
Funding for working capital. The rights issue is expected to raise MYR66m, out of which MYR65m (98% of total proceeds) will be utilized to finance its day-to-day operations while the balance MYR1m will be used to pay for the expenses of this rights/warrants issuances. Meanwhile, Kimlun may also raise up to MYR106m during the tenure of the warrant (assuming full exercise of the warrants) and the proceeds will also be used to fund its future growing working capital.
Earnings dilution. Excluding the warrants (which should be out of money upon issuance), the rights issue will raise Kimlun’s paid-up capital by 20% to 301m shares (from 241m presently). As a result, we estimate that Kimlun’s EPS in FY14-15 will dilute by 20% and EPS growth will be smaller at 7% and 10% respectively in FY14-15 (vs. +37% and +12% respectively before the rights issue). Additionally, the proforma net gearing is also expected to fall to 0.5x post the rights issue, from 0.6x as at end-Dec 2012
Source: Maybank Research - 1 Nov 2013
Rights issue with warrants. Kimlun has proposed a renounceable issue of 60m rights shares on the basis of 1 rights share-for-4 existing shares. The indicative price for the rights is MYR1.10, representing a c.38% discount to the theoretical ex-rights price of MYR1.77 (based on the 5-day WAMP). Additionally, the rights will be issued together with 60m free detachable warrants on the basis of 1 warrant-for-1 rights share, with an indicative exercise price of MYR1.77 and tenure of 10 years. The proposed exercise is expected to complete in 1Q14.
Funding for working capital. The rights issue is expected to raise MYR66m, out of which MYR65m (98% of total proceeds) will be utilized to finance its day-to-day operations while the balance MYR1m will be used to pay for the expenses of this rights/warrants issuances. Meanwhile, Kimlun may also raise up to MYR106m during the tenure of the warrant (assuming full exercise of the warrants) and the proceeds will also be used to fund its future growing working capital.
Earnings dilution. Excluding the warrants (which should be out of money upon issuance), the rights issue will raise Kimlun’s paid-up capital by 20% to 301m shares (from 241m presently). As a result, we estimate that Kimlun’s EPS in FY14-15 will dilute by 20% and EPS growth will be smaller at 7% and 10% respectively in FY14-15 (vs. +37% and +12% respectively before the rights issue). Additionally, the proforma net gearing is also expected to fall to 0.5x post the rights issue, from 0.6x as at end-Dec 2012
Source: Maybank Research - 1 Nov 2013
Labels: KIMLUN
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