A-Rank to venture into property development, plans two-for-five bonus issue

TheEdge Thu, Nov 08, 2018 01:47pm - 5 years View Original


KUALA LUMPUR (Nov 8): A-Rank Bhd has proposed to diversify its business to include property development, in view of intense market competition faced by its existing aluminium business.

While there is no assurance that the proposed diversification will be commercially viable or successful, the group said it intends to identify a joint venture partner with extensive experience as property developer for its initial investment, so as to reduce such risks.

In an exchange filing today, A-Rank said the property development business may contribute 25% or more of the group's net profits, therefore enhancing its prospects moving forward.

This will also result in a diversion of 25% or more of the net assets of the group.

“Whilst we believe that the existing business of the group is stable, it is increasingly competitive and subject to the volatility of its raw materials price, i.e. aluminium prices, as well as fluctuations in foreign exchange rates, particularly U.S. dollar vis-à-vis the ringgit.

“The board has identified property development as an opportunity, since the group does not wish to enter into any aluminium-related business, so as not to be seen to compete with our customers. The group also does not have any experience in any other businesses not related to aluminium,” A-Rank said.

Besides providing another income stream, the group said the proposed diversification would also allow itself to take advantage of attractive investment opportunities, as and when they arise.

Currently, A-Rank is involved in the business of manufacturing and marketing of aluminium billets. Its products are then sold to aluminium extrusion manufacturers as raw materials, and are used in many industries, including construction, transportation and consumer goods.

The group operates mainly in Malaysia, with approximately 65% of the revenue generated from domestic sales and the remaining 35% from export sales.

Currently, the group does not have any land bank for the purpose of property development.  

The company is also proposing a bonus issue of up to 51.45 million new shares, on the basis of two bonus shares for every five existing shares held by entitled shareholders. The entitlement date will be determined later.

A-Rank said the bonus issue will be implemented by capitalising up to RM25.70 million from the retained earnings of the company, on the basis of 50 sen per bonus share.

The proposed diversification will be subject to shareholders’ approvals at its forthcoming annual general meeting, while the bonus issue is expected to be completed by the first quarter of next year.

A-Rank shares closed unchanged at 82 sen in the morning session today, with 85,000 shares done, bringing a market capitalisation of RM98.56 million.

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