BCorp’s Cosway 1Q net profit soars

PETALING JAYA: Hong Kong-listed Cosway Corp Ltd, which Berjaya Corp Bhd (BCorp) intends to take private, has delivered a good set of financial results for 1QFY12 ended July 31.

According to an announcement by BCorp, Cosway’s net profit jumped nearly 84% to HK$79.6 million (RM32.2 million) from HK$43.3 million, with its top line increased to HK$1.1 billion, a 56% growth from HK$709.8 million for the previous corresponding period.

Cosway attributed the satisfactory performance to the Hong Kong and Macau markets while other key markets continued to provide moderate contributions to the group’s top and bottom lines.

The weakening Hong Kong dollar against other currencies, including the ringgit, also helped boost earnings in the special administrative region.

“The net profit growth registered for 1Q was also attributed to the non-recurring employee benefit expenses of HK$11.2 million incurred in last year’s corresponding quarter arising from the equity-settled transaction costs in relation to the share options scheme awarded to eligible directors and employees,” the statement said.

The latest set of financial results would probably speak well for BCorp’s proposal to take the network marketing company private in Hong Kong.

BCorp currently holds a 56.3% equity stake in Cosway. In a surprise move, BCorp had in early July made a general offer to buy out the company, which undertook a back-door listing in 2008, at HK$1.10 cash per share.

At HK$1.10 per share, BCorp values the company at HK$5.19 billion. The remaining 44.53% or 2.1 billion shares the group does not own is valued at HK$2.31 billion.

To finance the privatisation exercise, BCorp last Monday proposed a rights issue of new irredeemable convertible unsecured loan stocks (Iculs) together with free warrants to raise RM767.5 million.

The proposed privatisation exercise and cash call are inter-conditional.

“The new Iculs would provide entitled shareholders of the company an attractive annual yield while the warrants act as a ‘sweetener’ as this is a 10-year option to further increase their participation in the company at an attractive predetermined price,” said BCorp.

The company also proposed an exemption to BCorp chairman Tan Sri Vincent Tan and persons acting in concert with him from the obligation to undertake a mandatory takeover offer for all BCorp shares, existing Iculs, new Iculs and warrants not already owned by him and those acting in concert.

The proposed rights issue is only expected to be completed in 1Q12.

CIMB Research noted that the cash call is likely to be approved by BCorp shareholders given the 10-year duration of the Iculs and warrants and the 5% Iculs coupon rate, which is above fixed deposit rates.

However, CIMB Research pointed out that even if the rights issue managed to raise RM767.5 million, the group would still need to raise another RM533 million to fund the RM1.3 billion privatisation of Cosway.

On Bursa Malaysia yesterday, BCorp announced that Tan had purchased 100,000 Iculs through a company called Sublime Cartel Sdn Bhd, in which he is deemed to have an interest.

BCorp’s share price dropped to a 22-month low of 90 sen early this week from its peak of RM1.26 in July. It regained some losses to close at 97 sen yesterday.