KUALA LUMPUR (Oct 26): Dolphin International Bhd has proposed a new rights issue to raise up to RM13.38 million, mainly to repay its bank borrowings and cater for working capital after years of making losses.

The group had earlier announced a rights issue of up to RM17.24 million, but aborted the exercise just two weeks ago, citing a need for review after taking into consideration Dolphin's recent financial performance and changes in its financial needs.

Under the newly proposed rights issue, Dolphin will allocate up to RM5.13 million for working capital, RM7 million for repayment of bank borrowings and RM1.25 million for expenses of the corporate exercise, with Mercury Securities Sdn Bhd as the principal adviser.

The group told Bursa Malaysia that it plans to issue up to 178.38 million rights shares, together with up to 133.79 free detachable warrants at an issue price of 7.5 sen per rights shares.

Dolphin said these rights shares can be subscribed on the basis of four rights shares together with three detachable warrants, for every three existing shares.

The group has secured nine shareholders, including two with substantial shareholdings, for their undertaking to underwrite their full entitlements to the rights issue.

The shareholders are Asia Poly Holdings Bhd (10.5%), Datuk Yeo Boon Leong (8%), Seik Thye Kong (2.6%), non-executive director Yeo Boon Ho (2.3%), Tan Soon Hui (2.3%), executive director and chief executive officer Yeo Boon Thai (1.6%), Seik Yee Kok (1.1%), Yeo Soon Bee (1%) and non-executive director Lim Teck Seng (0.8%).

Boon Leong is also the executive chairman in Asia Poly, where Lim also sits on the board as non-executive director.

Dolphin said it will also procure other underwriters to subscribe for 14.5% or 25.83 million rights shares, at a cost of some of RM1.94 million, in order for the group to achieve the required minimum subscription level.

The group said the fund raising is needed to not only repay borrowings, but also to provide financial boost to its food and beverage business, which mainly consists of six Uncle Don’s franchise restaurants.

“Whilst the franchisor of Uncle Don’s has endeavoured to price its food and beverages competitively, the increase in food costs were not wholly passed on the consumers in order for the entire chain of Uncle Don’s restaurant outlets to stay competitive in the food and beverage service market.

“This in turn had resulted in the group achieving a lower profit margin from the business of its Uncle Don’s restaurant outlets,” it said.

Dolphin was originally a palm oil mill engineering services provider but subsequently ventured into the food and beverage business, which today is the largest revenue contributor to the group.

Shares of Dolphin closed one sen or 5.4% lower at 17.5 sen on Thursday, giving it a market capitalisation of RM23.41 million.