KUCHING: Hubline Bhd’s rights issue with warrants has been fully taken up, and is expected to raise more than RM50 million.
The Kuching-based shipping firm has made available for subscription 1,417,256,368 rights shares at an issue price of 3.7 sen a piece on the basis on three rights shares for every five existing shares held, together with 944,837,579 Warrants C on the basis of two Warrants C for every three rights shares subscribed by the entitled shareholders.
The exercise price of Warrant C is 5.5 sen.
When the fund raising exercise closed on Dec 7, the company received acceptances of 892,338,579 rights shares or 62.96 per cent of the total issuance while excess applications totalled 524,917,789 rights shares or 37.04 per cent, Hubline said in a filing with Bursa Malaysia on Monday (Dec 17).
Hubline has earlier entered into an underwriting agreement with Kenanga Investment Bank (Kenanga IB) to underwrite up to 650,826,618 rights shares.
Based on 3.7 sen per rights share, the company is expected to raise gross proceeds of RM52.4 million.
Based on an earlier indicative price of 4.5 sen per rights share, Hubline had in fact expected to raise up to some RM63.8 million.
The proceeds from the rights issue will be utilised for the repayment of loans taken by the company’s container shipping business segment, capital expenditure (acquisition of tugs, barges and vessels), working capital as well as expenses for the fund raising exercise.
The group, according to Hubline chief executive officer/managing director Dennis Ling Li Kuang, has total borrowings of RM95.2 million, which consists of some RM82.2 million related to container shipping business and RM13 million related to dry bulk business.
In 2016, Hubline ceased the container shipping business after incurring huge losses over the yeas due to intense competition from larger capacity container vessels and deceasing charter rates. As part of the group’s restructuring plan, it sold all the container vessels to focus on dry bulk business which has positive growth prospects.
To increase its fleet size and expand the dry bulk business, Ling said Hubline had placed orders for two barges of 10,000 tonnes each for RM20 million. The two barges are expected to be delivered mid-2019.
The company also plans to acquire three tugs and two barges (between 10,000 and 12,000 tonnes each) for RM50 million by end-2021.
And the company intends to acquire one to two vessels for the transportation of petrochemical products. Early this year, Hubline had signed a memorandum of understanding (MoU) with Petronas Chemicals Marketing (Labuan) Ltd to explore the possibility of providing logistic services in the transportation of petrochemical products.
Currently, Hubline owns and operates a fleet of 24 tugs and 23 barges, which have a capacity of between 8,000 and 10,000 tonnes.
Besides the proceeds from the rights issue, Hubline is also making use of the expected gross proceeds of RM200 million from a proposed issue of redeemable convertible notes for repayment of loans, acquisition of tugs, barges and vessels and its working capital.
Hubline has on July 27, 2018 entered into a conditional subscription agreement with Advance Opportunities Fund 1 (AOF 1) and Advance Credit Fund SPC (subscriber) and Advance Capital Partners Asset Management Private Ltd (the discretionary investment manager of AOF 1 ) (ACPAM) for the proposed issue of redeemable convertible notes with an aggregate principal amount of RM200 million. The proposed notes will be issued in five tranches, and are convertible at the option of the noteholder(s) into new Hubline shares.
To recall, Hubline had on July 18, 2016 entered into a subscription agreement (which being amended and supplemented thereafter) with AOF 1 and ACPAM for the issuance of 1.0 per cent equity-linked redeemable convertible notes due in 2021 in aggregate principal amount of up to RM80 million nominal value.
“The full repayment of the outstanding credit facilities related to the container shipping division will enable Hubline to reduce its gearing ratio and is expected to result in interest saving in coming years,” said Ling.
On the group’s prospects, he said its dry bulk business recorded revenue of some RM86.9 million and RM94.1 million respectively in financial year ended Sept 30, 2016 and 2017. In the six months to March 31, 2018, the revenue stood at RM47.3 million.
The dry bulk business segment generated net profit of RM3.8 million in FY2016 but suffered a loss of RM5.5 million in FY2017. In the six months to March 31, 2018, it returned to the black with a profit of RM1.8 million.
The group’s tugs and barges operate within the Southeast Asian region, plying the trading routes such as Indonesia, the Philippines, Vietnam, Cambodia and Thailand. Cargo for each voyage mainly comprises bulk-based commodities like coal, gypsum, palm kernel shells, scrap metal and sand.
“The routes plied by the dry bulk shipping tugs and barges are flexible and can be varied in accordance with market demand as each voyage caters to a single customer per shipment.
“The ability of its operations to streamline costs and maximise profitability by optimising its routing and scheduling of cargo has allowed the division to achieve a high level of vessel utilisation whilst still successfully gaining and maintaining market share,” said Ling.
He said through increased marketing efforts, Hubline had established various new routing opportunities and cemented long standing relationship with pre-existing dry bulk clients as well as fresh affiliations with new customers.
This, he added, has allowed dry bulk business to shift from only performing “north-south” routes from Indonesia to Thailand, Cambodia, Vietnam, Philippines and return to also performing “east-west” routes from Thailand to Vietnam and Philippines and return.
The latest routes introduced into the group’s operation include the transportation of wood chips from Singapore to Thailand and Philippines.
