E A TECHNIQUE M BERHAD I PROPOSED PRIVATE
E. A. TECHNIQUE (M) BERHAD (I) PROPOSED PRIVATE PLACEMENT (II) PROPOSED DEBT CAPITALISATION (III) PROPOSED FREE WARRANTS ISSUE 25 SEPTEMBER 2019
DETAILS OF THE PROPOSALS
Proposed Private Placement • Placement Arrangement • • Issue Price • • Basis and justification Ranking • • Issuance of up to 106, 355, 800 new Shares (approximately 21. 1% of total number of issued Shares) of which: Ø Up to 19, 148, 900 Placement Shares to Dato’ Hak. Ø Up to 25, 531, 900 Placement Shares to Sindora. Ø Up to 61, 675, 000 Placement Shares to independent third party investors. Placement Shares may be implemented in one or more tranches prior to Proposed Free Warrants Issue. Dato’ Hak and Sindora Ø RM 0. 47. Independent third party investors Ø To be determined later. Dato’ Hak and Sindora Ø The issue price for the Settlement Share. Ø Net asset per Share of RM 0. 45 based on the audited FYE December 2018. Ø Premium of 6. 7% to the VWAP of Shares up to including 1 July 2019, of approximately RM 0. 4403. Independent third party investors Ø To be determined and fixed by the board with a discount not more than 10. 0% to the VWAP immediately preceding the price fixing date. Placement Shares shall, upon allotment and issuance, rank equally in all respects with then existing Shares. 3
Proposed Debt Capitalisation Number of issue and price • • Issuance of 121, 622, 400 new Shares. RM 0. 47. • E. A. Technique shall pay debt owning to Sindora of RM 57. 2 mil as at 31 May 2019 for the following: Ø Advances for payments to vendors and creditors of the contract for the provision of EPICIC of an FSO facility, and normal operating expenses – RM 52. 5 mil. Ø Interest portion – RM 4. 7 mil. As at 15 August 2019, the amount owing by the Company to Sindora was RM 59. 9 million (including interest 6. 85% p. a). Remaining of RM 2. 7 million will be paid when the Company has sufficient funds in the future. Amount owning to Sindora • Basis and justification Ranking Conditions precedent of the Settlement Agreement • • NA per Share of RM 0. 45 based on the audited FYE December 2018. Premium of 6. 7% to the VWAP of Shares up to and including 1 July 2019, of approximately RM 0. 4403. • Settlement Shares shall, upon allotment and issuance, rank equally in all respects with then existing Shares. • Condition Precedents being fulfilled or obtained within four months from 2 July 2019 or such later date that the parties may mutually agree: Ø Approval from Bursa Securities for the listing of and quotation for the Settlement Shares; Ø Approval from the non-interested shareholders at this EGM; Ø Written consent from lenders/financiers, if any; Ø Other necessary approvals/consents from the relevant authorities/parties, if any. 4
Proposed Free Warrants Issue • Basis • • To be determined by the Board after taking into consideration the following: Ø The historical trading price of the Shares. Ø VWAP of the Shares. Ø The prevailing market conditions. Ø The future working capital requirements of E. A. Technique. • 5 years commencing from and inclusive of the date of issue of free Warrants. • • Holders of the Warrants will not be entitled to any voting rights or participation in any form of distribution. New Shares arising from the exercise of the Warrants shall, upon allotment and issuance, rank equally in all respects with then existing Shares. Exercise Price Tenure Ranking Issuance of up to 365, 989, 100 free Warrants on the basis of 1 Warrant for every 2 existing Shares held on the entitlement date to be determined later. To be issued at no cost to the shareholders. 5
USE OF PROCEEDS
7 Use of Proceeds from the Proposed Private Placement Details of use of proceeds Estimated timeframe for use RM’ 000 Part finance for construction of three units of oil tankers(1) Within 12 months 39, 360 Working capital requirements Within six months 9, 127 Estimated expenses in relation to the Proposals Within one month 1, 500 Total 49, 987 Note: 1) On 16 May 2019, the Company was awarded a five-year contract with five extension options of one year each by PETCO Trading Labuan Company Limited (“PETCO”) vide its letter of award dated 8 May 2019, to provide three units of 9, 000 deadweight tonnage (“DWT”) size vessels for the provision of coastal vessel services on long-term time charter. The contract (excluding the optional periods) is worth approximately RM 239. 1 million. The duration of the contract is for a primary period of five years with five extension options of one year each. This contract is expected to commence as follows: (a) vessels 1 and 2: December 2020; and (b) vessel 3: January 2021. The contract is expected to expire in January 2026 for the primary period or in January 2031 if all of the extension options have had been fully exercised. The total construction cost of the said vessels is approximately RM 198. 0 million. The remaining cost for the construction of the vessels will be funded via internally generated funds and/or bank borrowings, the proportion of which will be determined later.
RATIONALE AND JUSTIFICATION FOR THE PROPOSALS
Rationale and Benefits of the Proposals Proposed Private Placement Proposed Debt Capitalisation Proposed Free Warrants • • • To finance the construction of three units tanks. To raise fund expeditiously and cost effectively as compared to other fund-raising exercises. Without incurring interest costs as compared to funding via bank borrowings. To strengthen the financial position and capital base. To comply with the public shareholding spread. Dato’ Hak and Sindora demonstrate their commitment. • To reduce debt and interest costs whilst preserving the Group’s cash reserves. Gross interest savings of approximately RM 3. 6 mill p. a (interest rate 6. 85% p. a). To strengthen the Company’s equity base, NA, and gearing ratio. To preserve cash for other purposes such as working capital requirements. To avoid dilution in Sindora’s shareholdings and the Company is able to continue to tap on its resources. • • To reward shareholders for their support and enable them to participate in the convertible securities without cost. To provide shareholders with an opportunity to further increase their equity participation. A “sweetener” to potential investors to encourage them to participate in the Proposed Private Placement. To strengthen the Company’s financial position, capital base and provide funds for working capital requirements when exercised, without incurring costs as compared to bank borrowings. 9
EFFECTS OF THE PROPOSALS
11 Effects of the Proposals Issue share capital For illustrative purposes only, the pro forma effects of the Proposals on the issued share capital of the Company are as follows: No of Shares RM Issued share capital as at LPD 504, 000 169, 100, 000 To be issued pursuant to the Proposed Private Placement (1) 106, 355, 800 49, 987, 250 After the Proposed Private Placement 610, 355, 800 219, 087, 250 To be issued pursuant to the Proposed Debt Capitalisation 121, 622, 400 57, 162, 548 After the Proposed Debt Capitalisation 731, 978, 200 276, 249, 798 To be issued assuming full exercise of Warrants (2) 365, 989, 100 201, 294, 005 1, 097, 967, 300 477, 543, 803 Enlarged issued share capital Notes: (1) Based on the issue price per Placement Share to Dato’ Hak and Sindora of RM 0. 47, and Indicative Issue Price of RM 0. 47. (2) Based on the illustrative exercise price of RM 0. 55 per Warrant.
12 Effects of the Proposals NA per Share and Gearing For illustrative purposes, the pro forma effects of the Proposals on the consolidated NA and gearing, and NA per Share as at 31 December 2018 are as follows: Pro forma III Pro forma IV After Pro forma II and the Proposed Free Warrants Issue RM’ 000 276, 250 56, 285 332, 535 After Pro forma III and upon full exercise of the Warrants RM’ 000 477, 544 56, 285 533, 829 Audited as at 31 December 2018 RM’ 000 169, 100 57, 785 226, 885 After the Proposed Private Placement RM’ 000 219, 087 57, 785 276, 872 After Pro forma I and the Proposed Debt Capitalisation RM’ 000 276, 250 57, 785 334, 035 No of Shares in issue (‘ 000) NA per Share (RM) 504, 000 0. 45 610, 356 0. 45 731, 978 0. 46 731, 978 0. 45 1, 097, 967 0. 49 Total interest-bearing borrowings (RM’ 000) Gearing (times) 400, 415 343, 253 1. 76 1. 45 1. 03 0. 64 Share capital Retained earnings Shareholders’ fund / NA
13 Effects of the Proposals Substantial Shareholders’ Shareholdings For illustrative purposes, the pro forma effects of the Proposals on the substantial shareholders’ shareholdings are as follows: % 53. 2 50. 6 4. 7 16. 8 Pro forma I After the Proposed Private Placement Direct Indirect No of Shares % No of Shares 293, 416, 200 12, 884, 300 2. 1 280, 531, 900 46. 0 103, 698, 900 17. 0 23, 495, 700 23, 130, 700 3. 8 104, 063, 900 % 56. 7 54. 9 3. 2 14. 2 Pro forma III After Pro forma II and upon full exercise of the Warrants Direct Indirect No of Shares % 622, 557, 900 56. 7 19, 326, 450 1. 8 603, 231, 450 54. 9 155, 548, 350 14. 2 35, 243, 550 3. 2 34, 696, 050 3. 2 156, 095, 850 14. 2 As at the LPD JCorp Kulim Sindora Dato’ Hak Datin Hamidah Direct No of Shares 12, 884, 300 255, 000 84, 550, 000 23, 130, 700 JCorp Kulim Sindora Dato’ Hak Datin Hamidah Pro forma II After Pro forma I and the Proposed Debt Capitalisation Direct Indirect No of Shares % No of Shares 415, 038, 600 12, 884, 300 1. 8 402, 154, 300 54. 9 103, 698, 900 14. 2 23, 495, 700 23, 137, 700 3. 2 104, 063, 900 % 2. 6 50. 6 16. 8 4. 6 Indirect No of Shares 267, 884, 300 255, 000 23, 495, 700 84, 915, 000 % 48. 1 46. 0 3. 8 17. 0
Effects of the Proposals Earnings and EPS • Proposed Private Placement • • • Proposed Debt Capitalisation • • Proposed Free Warrants • • Not expected to have any material effect on the earnings of the Group for the financial year ending 31 December 2019. EPS for the financial year ending 31 December 2019 is expected to be diluted as a result of the increase in the number of Shares in issue upon issuance of the Placement Shares. Nonetheless, it is expected to contribute positively to the future earnings of the Group when the benefits of the use of proceeds are realised. Expected to result in gross interest savings of approximately RM 3. 6 million per annum as the debt pursuant to the Proposed Debt Capitalisation bears an interest rate of 6. 85% per annum. EPS for the financial year ending 31 December 2019 is expected to be diluted as a result of the increase in the number of Shares in issue upon issuance of the Settlement Shares. Not expected to have any material effect on the earnings of the Group for the financial year ending 31 December 2019. Assuming that the earnings of the Group remain unchanged, the EPS of the Group will be proportionately diluted as a result of the increase in the number of Shares in issue as and when the Warrants are exercised. Nonetheless, it is expected to contribute positively to the future earnings of the Group when the benefits of the use of proceeds from the exercise of Warrants are realised. 14
CONDITIONALITY AND TENTATIVE TIMELINE
Conditionality and tentative timeline Conditionality • The Proposed Private Placement, the Proposed Debt Capitalisation and the Proposed Free Warrants Issue are not inter-conditional upon each other. • The Proposed Private Placement to Dato’ Hak, the Proposed Private Placement to Sindora and the Proposed Private Placement of the Remaining Placement Shares are not conditional upon each other. Implementation • The Proposed Private Placement to Dato’ Hak and Sindora, initially, without the placement of the Remaining Placement Shares, may result in the pro forma public shareholding spread decreasing to 23. 1% (computed based on available shareholding information as at LPD). In order to comply with the public shareholding spread requirement, the Company will allocate such number of the Placement Shares to Dato’ Hak, Sindora and third party investors, at each tranche, based on a ratio which enables the Company to meet the public shareholding spread requirement. In view of that, the Proposed Private Placement of the Placement Shares to Dato’ Hak and Sindora may also be implemented in one of more tranches, together with the timing of the tranches of the Proposed Private Placement of the Remaining Placement Shares. • To illustrate, if the Company is able to place 13, 950, 000 Placement Shares to independent third party investors, it will only then be able to fully implement the Proposed Private Placement of the Placement Shares to Dato’ Hak and Sindora of 19, 148, 900 and 25, 531, 900 Placement Shares, respectively. The pro forma public shareholding spread as at the LPD, pursuant to this illustration, is 25. 0%. • For the avoidance of doubt, the Proposed Debt Capitalisation will only be implemented upon completion of the Proposed Private Placement of 61, 675, 000 Placement Shares to independent third party investors. • Further, as the issuance of the Settlement Shares upfront, may result in the pro forma public shareholding spread decreasing to 20. 3% (computed based on available shareholding information as at LPD), the Company will only complete the Proposed Debt Capitalisation following the completion of the Proposed Private Placement of 61, 675, 000 Placement Shares to independent third party investors. The pro forma public shareholding spread as at the LPD following the completion of the Proposed Private Placement and the Proposed Debt Capitalisation will be 25. 7%. 16
17 Conditionality and tentative timeline Tentative timeline • The Proposed Free Warrants Issue will be expected to be implemented after the completion of the Proposed Private Placement and the Proposed Debt Capitalisation. • The tentative timeline for the Proposals is as follows: 25 September 2019 § EGM November 2019 January 2020 § Listing of and quotation for the Placement Shares § Announcement of the entitlement date for the Proposed Free Warrants Issue § Listing of and quotation for the Settlement Shares Mid February 2020 § Listing of and quotation for the Warrants
THANK YOU
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