Astral Supreme proposes capital reduction, rights issue and diversification

by **Cals** Fri 01 Aug 2014, 02:02

Business & Markets 2014

Written by Liew Jia Teng of theedgemalaysia.com

Thursday, 31 July 2014 09:36

KUALA LUMPUR: Electronic products and components manufacturer, Astral Supreme Bhd, proposed a series of corporate exercises yesterday, including a capital reduction and a cash call, as well as diversification into the construction and property sectors.

In a filing with Bursa Malaysia yesterday, Astral Supreme proposed a share capital reduction involving the cancellation of 10 sen from the par value of each existing share, which would result in its par value being halved from 20 sen to 10 sen.

The group also proposed a capital reserve reduction of RM553 million and a share premium reduction of up to RM11.41 million.

Astral Supreme said the proposed capital reduction would rationalise its financial position by reducing accumulated losses to better reflect the value of the group as represented by available assets.

The group also proposed a rights issue of up to 809.56 million new shares, to be implemented after the capital reduction, on the basis of two rights shares for every existing share held.

This comes with some 404.78 million free detachable new warrants, dubbed warrants-C, on the basis of one warrants-C for every two rights shares subscribed by entitled shareholders.

Based on the indicative issue price of 10 sen per rights share, the proposed rights issue with warrants is expected to raise between RM10 million and RM80.96 million in gross proceeds.

The cash call, said the group, is to raise funds without incurring interest costs, as compared to bank borrowings or issuance of debt instruments.

“This will allow the company to preserve cash flow for reinvestment and operational purpose(s),” it said.

Astral Supreme, which is currently engaged in electronics contract manufacturing, assembly and export, has also proposed to diversify into construction, property development and property investment.

“The additional revenue contribution from construction, property development and property investment activities will provide the group with an additional stream of earnings, which is expected to enhance the group’s profitability and returns on shareholders’ fund,” it said.

The corporate exercises are expected to be completed by the fourth quarter of 2014.

From its audited financial statements for the past three financial years ended Dec 31, 2011 to 2013 (FY11 to FY13), the group has been experiencing fluctuating revenue levels, mainly in its electronics contract manufacturing division. Consequently, it recorded losses in FY11 and FY13.

Going forward, Astral Supreme said the group anticipates that the electronics contract manufacturing division will remain challenging for the financial year ending Dec, 31, 2014 (FY14).

“The board takes cognisance of the lacklustre financial performance of the group and has endeavoured to take necessary steps as well as considered various avenues to turnaround the financial position of the group,” it added.

Last Friday, Astral Supreme’s wholly-owned Astral Supreme Construction Sdn Bhd terminated a joint-venture agreement with Zenith PMC Sdn Bhd involving the proposed construction of various roads in Penang and an undersea tunnel between the island and Seberang Perai.

The project was called off after Zenith declined Astral Supreme Construction’s appeal to delay the implementation of the agreement following a breach in agreement, and the latter’s failure to remedy the breach in time.

Astral Supreme closed at 13 sen yesterday, down one sen or 7.1%, with 11.08 million shares changing hands.

This article first appeared in The Edge Financial Daily, on July 31, 2014.