KUCHING: Independent adviser Mercury Securities Sdn Bhd has recommended non-interested shareholders of Dayang Enterprise Holdings Bhd to vote in favour of Dayang’s proposed rights issue and subscription of new redeemable convertible preference shares (RCPS) in Perdana Petroleum Bhd (PPB) during its upcoming extraordinary general meeting (EGM) on Oct 1 in Miri.
The proposed subscription is “fair and reasonable” and is “not detrimental” to the non-interested shareholders of Dayang,said Mercury Securities in its independent advice letter to them.
The ordinary resolutions to be tabled at the EGM are:
• proposed renounceable rights issue of 96,480,983 new ordinary shares in Dayang on the basis of one rights share for every 10 existing shares based on an entitlement date to be determined later,and
• proposed subscription of new RCPS of up to RM455 million in PPB at an entitlement basis and an issue price to be determined later under a proposed rights issue of RCPS to be undertaken by PPB.
The proposed rights issue, according to Dayang, will be undertaken on a full subscription basis.
Dayang has procured irrevocable and unconditional undertakings from its shareholders – Naim Holdings Bhd, Datuk Ling Suk Kiong, Joe Ling Siew Loung @ Lin Shou Long, Datin Wong Siew Hong, Vogue Empire Sdn Bhd, Datuk Hasmi Hasan and Tengku Datuk Yusof Tengku Ahmad Shahruddin (undertaking shareholders) to subscribe in full for their respective entitlements under the proposed rights issue.
The undertaking shareholders collectively own 497,780,406 shares or 51.59 percent equity interest in Dayang. Dayang intends to procure underwriting arrangement(s) for the remaining 46,702,945 rights shares for which no irrevocable undertaking to subscribe has been obtained to ensure full subscription of the rights shares (underwriting). The underwriting will be finalised at a later date prior to the implementation of the proposed rights issue.
Based on the illustrative issue price of 80 sen per right share,the proposed rights issue is expected to raise gross proceeds of about RM77.18 million. From the proceeds,Dayang is proposing to utilise RM70 million for repayment of borrowings, RM4.685 million for working capital and the balance RM2.5 million to pay for the estimated expenses of the proposed rights issue.
Dayang has also proposed a private placement of up to 96,480,983 new shares representing about 10 percent of its total number of issued shares. The proposal will be implemented under the existing general mandate approved by Dayang shareholders at the annual general meeting on May 24, 2018. Based on the illustrative issue price of RM1.14 per share,the private placement is expected to raise gross proceeds of up to RM109.99 million.
The proceeds from the private placement will be used for build-up of sinking fund for a proposed Sukuk Programme (RM75 million), capital expenditure (RM15 million), working capital (RM17.498 million) and estimated expenses for the proposed private placement (RM2.5 million).
Pursuant to the proposed Sukuk Programme, a principal amount of up to RM682.5 million will be raised. The company intends to utilise RM75 million from the proceeds raised from the private placement to repay part of the principal amount and interest falling due during the first three years of the Sukuk tenure.
PPB, of which Dayang is the single largest shareholder with stake of 60.48 percent, has on the other hand,proposed to undertake a renounceble rights issue of RCPS to its entitled shareholders.The RCPS issue is intended to raise minimum gross proceeds of RM455 million or maximium gross proceeds of up to RM506 million. Dayang will provide a written unconditional and irrevocable undertaking to PPB to subscribe for the RCPS up to RM455 million.
The proposed subscription will be undertaken via a set-off arrangement for such amount owing by PPB to Dayang. Dayang is undertaking the various proposals in conjunction with the restructuring of the group’s debt, including the proposed Sukuk Programme by Dayang.
Mercury Securities said it is of the view that the basis and justification of the rights issue price, placement issue price, PPB RCPS issue price, PPB Rcps redemption price and PPB RCPS conversion price are “fair and reasonable.”
On the prospects of the Dayang group (including the PPB group) in the O&G industry,Mercury Securities said: “We are of the view that the future prospects appear to be positive” after taking into consideration the past experience and track record of the Dayang group, including PPB group, and the outlook of the O&G industry.
