JAKS Resources (JAKS) has proposed yet another equity raising exercise via a private placement of up to 10.0% of the total number of issued shares of the Group. The proposed private placement entails an issuance of up to 68.7m shares, and based on illustrative issue price of RM0.80, the Group could raise up to RM55m. We understand that more than 70% will be used for its Vietnam Power Plant Project, while the rest will be for new renewable energy projects and paying down bank debts. Net gearing is estimated to be reduced to 0.3x post private placement from 0.45x currently. As we have flagged earlier in our report, we are wary of the Group’s various dilutive equity raising and this is the fourth equity raising exercise in recent years. All told, we remain Neutral on the stock with our TP of RM0.75 (pegged at 50% to SOTP) unchanged for now pending completion of the private placement.
Private placement to raise up to RM55m. JAKS Resources Bhd plans to place out up to 10% of its shares to third party investors to raise up to RM55m just four months after the completion of a rights issue with warrants that failed to raise sufficient funds required for its Vietnam power plant project due to under subscription with a take-up rate of only 37.52%. That exercise only managed to tap about RM26m in gross proceeds as compared to RM68m it targeted to raise to expedite the project. Of the proceeds from this current exercise, RM39m or 72% will be used for the payment of additional equipment and additional costs that have arisen from its Vietnam power plant joint venture project with China Power Engineering Consulting Group Co Ltd, which is 56% constructed as at April 11. Remainder of the proceeds will be for preliminary expenses for its venture into renewable energy projects in Southeast Asia, possibly in solar and hydro power projects in Vietnam, Indonesia, and Malaysia, and to repay bank borrowings.
Source: PublicInvest Research - 19 Apr 2019