TSH Resources (TSH) announced last week that it is planning to undertake an 1.84% private placement of its shares, which would involve the issuance of 25m new shares, increasing its share capital from 1.35bn to 1.38bn shares. The shares will be allocated to third party institutional investors, who will be identified at a later date. At this juncture, our forecasts remain unchanged pending the completion of the placement within the next 3 months. We reiterate our Neutral rating on TSH.
Pricing of the placement. Indicative price of the placement shares has yet to be known. However, it is expected to be priced based on a discount of not more than 10% from the 5-day weighted market average market price of TSH shares immediately before the price fixing date. Assuming an indicative issue price of RM1.73 per share, TSH’s placement is expected to raise proceeds of RM43.2m
Utilisation of proceeds. Almost all the proceeds from the placement will be used for the working capital of TSH including daily operating expenses. The placement exercise will help the group to strengthen its balance sheet by improving its net gearing from 0.93x to 0.86x.
Minimal dilution. The proposed placement is expected to have a minimal dilutive effect on TSH’s FY17 numbers onwards. Based on the enlarged share capital of 1.38bn shares, our forecasted FY17-19 EPS will be diluted by approximately 3% to 8.8-9.4sen from 9.1- 9.7sen. Consequently, our target price will also be adjusted from RM1.87 to RM1.82. We are leaving our estimates unchanged at this juncture however.
Reiterate Neutral call with unchanged target price of RM1.87. We are maintaining our fair value at RM1.87 based on 20x FY18 EPS for now but will review it upon completion of the private placement within the next 3 months.
Source: PublicInvest Research - 10 Jul 2017
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| TSH (9059) - TSH Resources Berhad - Proposing Private Placement |
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