Highlight Asia Knight plans PN17 exit with venture into construction

by **Cals** Wed 14 Oct 2015, 02:01

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[size=28]Asia Knight plans PN17 exit with venture into construction

By Supriya Surendran / theedgemarkets.com | October 13, 2015 : 11:20 PM MYT

KUALA LUMPUR (Oct 13): Plastic parts manufacturer Asia Knight Bhd ([You must be registered and logged in to see this image.] Valuation: 0.00, Fundamental: 0.80), which fell into Practice Note 17 (PN17) status in October last year, following a disclaimer of opinion issued on its financial statements ended June 30, 2014 (FY14), is looking to regularise its condition by venturing into the construction sector.

In its proposed regularisation plan submitted to Bursa Malaysia today, Asia Knight said that it had entered into a conditional share sale agreement (SSA) to acquire construction firm PA Builders Sdn Bhd from Mazlan Mohd Yunus and Foo Onn (the vendors) for RM75 million, to be satisfied via RM5 million cash and 350 million new Asia Knight shares at an issue price of 20 sen each.

In consideration of Asia Knight agreeing to buy the entire stake in PA Builders, the vendors have made a covenant and agree to warrant to Asia Knight that the profit after tax of PA Group for the financial years ending July 31, 2016 and July 31, 2017 shall not be less than RM8 million per financial year.

“The proposed acquisition will allow Asia Knight to venture into construction business, an industry with positive growth prospects via a profitable company, as a means to improve the financial performance of the group and to enhance its shareholder value.

“Without the proposed acquisition, the company will not be able to regularize its financial position and will be delisted, given its PN17 status,” it said.

Upon completion of the SSA, the present board and key management team of Asia Knight will resign and the appointment of new directors and new key management will take place.

The names of the proposed new directors and key management team of Asia Knight will be identified at a later stage, before the completion of the SSA. In any event, the vendors will be appointed to the board of directors of Asia Knight, upon the completion of the proposed acquisition.

Asia Knight is also proposing an exemption for the vendors from the obligation to undertake a mandatory general offer for the remaining Asia Knight shares not already held by them and the parties acting in concert, pursuant to Paragraph 16 of Practice Note 9 of the Malaysian Code of Take-Overs and Mergers 2010, following the issuance of the consideration shares to the vendors.

Leading up to the acquisition, the group has proposed a capital reduction of its existing issued and paid up share capital pursuant to Section 64 of the Companies Act, 1965, which will involve the cancellation of 80 sen from the par value of each existing share of RM1 each.

The proposed capital reduction will give rise to a credit amount of RM46.51 million, which will be utilised to set-off against Asia Knight’s accumulated losses.

Its regularisation plan also entails a proposed reduction of the share premium account of Asia Knight by RM2.46 million, based on the audited financial statements of the group for FY14 pursuant to Section 60(2) and 64(1) of the Act.

The credit arising from the proposed share premium reduction will be utilised to further reduce the group’s accumulated losses, after the proposed capital reduction.

Besides that, Asia Knight is proposing a renounceable rights issue of 58.13 million new shares of 20 sen each in Asia Knight shares, together with 58.13 million detachable free warrants, at an issue price of 20 sen each per rights share, on a basis of one rights share for every existing ordinary share held after the proposed capital reduction, together with one free warrant for every rights share subscribed.

The group is also proposing a placement of 125 million new Asia Knight shares to investors to be identified later, at an issue price of 20 sen per placement share.

The proposed rights issue with warrants and proposed placement are expected to raise gross proceeds of RM11.6 million and up to RM25 million respectively, which are to be used mainly for working capital purposes.

Also forming part of its regularisation plan is a proposed new employee share option scheme of up to 10% of its share capital, for eligible directors and employees of the group and its subsidiaries, sans the dormant ones.

The group is also proposing an increase in its authorised share capital from RM100 million comprising 100 million shares of RM 1 each, to RM200 million comprising one billion shares of 20 sen each.

Following this, it is seeking for its Memorandum and Articles of Association to be amended to facilitate the proposed capital reduction and increase in authorised share capital.

Asia Knight's shares closed down 0.5 sen or 1.27% to 39 sen today, bringing it's market capitalisation to RM22.67 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)
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