KUALA LUMPUR (June 10): Hua Yang Bhd has proposed to undertake a renounceable rights issue of up to 88 million new shares coupled with free warrants to raise up to RM17.6 million.

It is seeking an exemption from the Securities Commission Malaysia to relieve major shareholder Heng Holdings Sdn Bhd (HHSB) from its mandatory offer obligation as a result of the cash call.

In a bourse filing on Friday (June 10), the property developer said the rights issue with warrants entails the issuance of one rights share for every four existing Hua Yang shares held.
 
The warrants will be issued on the basis of one warrant for every one rights share subscribed for by entitled shareholders.

At an illustrative issue price of 20 sen per rights share — a discount of approximately 17.46% to the theoretical ex-rights price of Hua Yang shares of 24.23 sen, Hua Yang is expected to raise up to RM17.6 million in proceeds, of which RM11.8 million will be for working capital, RM4 million for repayment of bank borrowings, RM1.35 million for the acquisition of new landbank, joint ventures and investments, and RM455,000 for estimated expenses.

Hua Yang noted that the rights issue will be undertaken on a minimum subscription level and it intends to procure an irrevocable undertaking from its major shareholder HHSB to subscribe to its entitlement of 28.02 million rights shares as well as subscribe to additional unsubscribed rights shares — the aggregate amount subscribed shall amount to at least RM7 million.

The company said it is obtaining an irrevocable undertaking from its chief executive officer and executive director Ho Wen Yan — who is also a major shareholder of Hua Yang by virtue of his indirect interest held via HHSB — to subscribe to his entitlement which amounts to 451,110 rights shares.

HHSB and persons acting in concert (PACs) — including Ho — collectively hold 114.7 million shares or a 32.58% stake.

“Assuming none of the other entitled shareholders subscribe for their respective entitlements under the proposed rights issue with warrants, the shareholdings of [HHSB and the PACs] in Hua Yang is expected to increase from 32.58% to above 33% of the enlarged issued share capital of Hua Yang, triggering the obligation to undertake a mandatory offer,” Hua Yang said.

The group noted that it is not the intention of HHSB and the PACs to undertake a mandatory take-over offer as a result of the proposed rights issue with warrants.

It will also seek shareholders’ approval for the proposed exemption at an extraordinary general meeting to be convened.

The proposed rights issue with warrants and proposed exemption are expected to be completed in the fourth quarter of 2022.

UOB Kay Hian Securities (M) Sdn Bhd has been appointed as the adviser to Hua Yang for the proposals, while MainStreet Advisers Sdn Bhd has been appointed as the independent adviser to the non-interested shareholders of the company on the proposed exemption.

Hua Yang shares closed half a sen or 1.96% higher at 26 sen on Friday, giving it a market capitalisation of RM91.51 million.