KUCHING: Borneo Oil Bhd (BOB) thinks that the gross proceeds of up to RM24.74 million which is expected to be raised from its proposed private placement exercise is adequate to address the group’s funding requirements for the time being.
The group is undertaking the proposed private placement to defray the general working capital expenses for its day-to-day operations, it said in additional information on the fund-raising exercise furnished with Bursa Malaysia.
On May 26, 2022, BOB said it proposed to undertake a private placement of up to 10 per cent of the company’s total issued shares to third party investor(s) to be determined later.
At an indicative issue price of RM0.0235 per placement share, this will raise about RM17.6 million (minimum scenario) and RM24.74 million (maximum scenario) for its working capital expenses within 36 months.
BOB group is principally engaged in food & franchise operation (FFO), property investment & management (PIM), resources & sustainable energy (RSE) and head office and others. The company owns home-grown fast food restaurant chain SugarBun.
“The group’s business operations in the FFO segment requires enough financial resources and sufficient cash flow to purchase raw materials, such as chicken meat and wheat flour for their products such as SugarBun brand broasted chicken and Pezzo brand pizzas.
“The PIM segment also requires financial resources for the payment to contractors for construction works at the ILPP (integrated limestone processing plant),” it said.
For the nine-month financial period ended March 31, 2022, BOB posted group revenue of RM51.78 million, which represented an increase of RM16.19 million or 45.5 per cent against RM35.59 million recorded in the preceding financial period.
The higher revenue was mainly attributed to increase in the turnover of the property investment & management segment as well as FFO segment which amounted to RM13.21 million and RM6.09 million respectively.
During the same period, BOB group posted pre-tax profit of RM49.12 million from loss of RM6.96 million previously due to the fair value gain in the disposal of investment shares amounting to RM50.68 million.
BOB said its board of directors takes cognisance that the effects of the COVID-19 pandemic are still prevalent in the recovery of the Malaysian economy, the mining and food services industries.
“There is no assurance that a resurgence of Covid-19 cases will not adversely impact the group’s existing business operations and financial position. Further, the prolonged Russia-Ukraine conflict could, directly or indirectly, affect the business operations and costs of the group.
“The management of the company will review and assess the group’s general working capital requirements from time to time to further strengthen its financial positions.
“The proceeds raised from the private placement will also allow the group to maintain flexibility over the cash flow funding of its businesses without being over-reliant on bank borrowings so as to not incur additional interest costs or service additional principal payments which may affect its financing performance moving forward,” it added.
BOB said its board of directors is of the view that the proposed private placement is the most appropriate avenue of fund raising at this juncture to address the group’s short-term financing needs. The proposed private placement is expected to be completed in third quarter-2022.