Hot Stock Bumi Armada falls 7% after pricing rights shares, earnings dilution seen

by **Cals** Wed 27 Aug 2014, 23:18

Hot Stock Bumi Armada falls 7% after pricing rights shares, earnings dilution seen

Business & Markets 2014

Written by Liew Jia Teng of theedgemalaysia.com

Wednesday, 27 August 2014 16:17

KUALA LUMPUR (Aug 27): Bumi Armada Bhd fell as much 7.1% among top decliners after the offshore oilfield service provider priced its rights share at RM1.35 apiece.

Remisiers said institutional investors seemed reluctant to subscribe for the rights shares despite a huge discount. This is in anticipation of earnings dilution as the proposed rights issue, which is undertaken together with a bonus share exercise, involves new shares, which will expand Bumi Armada's share base.

At 3.49pm, Bumi Armada was traded at an intraday low of RM3.03, down 23 sen, or 7.1%, with some 7.34 million shares done. The counter, which was traded at a high of RM3.25 today, was the third-largest decliner on Bursa Malaysia.

“I think some funds don’t want to fork out extra money to buy the rights share, while some funds may want to adjust their investment portfolio,” remisier Raymond Foo Chee Guan told theedgemalaysia.com over telephone.

After the rights and bonus issue, Foo said Bumi Armada’s earnings per share (EPS) would be diluted.

“Some funds refused to subscribe for the rights shares and it could also be due to Bumi Armada’s earnings prospect,” said Foo.

He said Bumi Armada’s earnings performance in the last two quarters were not good as it recorded lower EPS. Hence, with the rights share coming in, the EPS is expected to go even lower.

To recap, Bumi Armada had on May 23, 2014 proposed a renounceable rights issue of up to 1.479 billion shares on the basis of one rights share for every two existing shares held by entitled shareholders. It also proposed one-for-two bonus issue of up to 1.479 billion shares.

Today, Bumi Armada said it has fixed the rights issue price at RM1.35 apiece which represents a discount of about 32% to the theoretical ex-all price (TEAP) of RM1.98 per share.

Bumi Armada said the rights issue price was expected to raise gross proceeds of up to RM1.997 billion.

Trading in Bumi Armada shares was halted for an hour between 9.43am and 10.43am today in conjuction with the announcement.