KUCHING: Naim Holdings Bhd is on the way to raise up to RM159.9 million from a proposed rights issue to mainly finance its three major residential property projects in the state capital, Miri and Bintulu.
Sarawak’s leading property developer has obtained all the necessary approvals from relevant authorities to undertake a renounceable rights issue of up to 355,416,000 ordinary shares at an issue price of 45 sen a piece on the basis of three rights shares for every two existing shares held by entitled shareholders on Dec 24.
The issue price represents a discount of 18.18 per cent to the theoretical ex-rights price of 55 sen.
Naim shareholders gave their green light to the company’s proposed corporate exercise last month.
The ex-date for the rights issue is Dec 20 and entitlement date Dec 24. The rights commences trading on Dec 26 and the rights cessation quotation is on Jan 4. The last day for acceptance, renunciation and payment for the subscribed rights shares is on Jan 11, Naim said in a filing with Bursa Malaysia on Tuesday.
To meet the minimum target of raising RM100 million from the proposed rights issue, Naim major shareholders Datuk Amar Abdul Hamed Sepawi and Datuk Hasmi Hasnan and persons acting in concert with them (PACs) undertake to subscribe for their respective entitlements amounting to some 142.24 million shares and an additional 79.98 million shares not taken up by other entitled shareholders.
Abdul Hamed and Hasmi, who are the company chairman and managing director respectively, and their PACs collectively own about 94.83 million shares or 40.02 per cent of Naim’s issued capital of 250 million (excluding 13 million treasury shares). Their application for an exemption from the obligation to undertake a mandatory offer for the remaining Naim shares not already owned by them arising from the subscription for the excess rights shares was approved by the Securities Commission on Nov 30.
The proposed rights issue, according to Naim, will strengthen its financial position and capital base by reducing its gearing level and increasing its net assets, thereby providing a greater financial flexibility.
Naim group was hit by massive pre-tax losses of RM147 million in financial year ended Dec 31, 2017 due mainly to the Klang Valley Mass Rapid Transit (MRT) project and its oil and gas associate Dayang Enterprise Holdings Bhd. This was the first-ever loss suffered by the company in its 23-year corporate history.
Subsidiary Naim Engineering Sdn Bhd was awarded two MRT contracts worth a combined RM412.7 million to build six stations.
Abdul Hamed has attributed the MRT project’s losses to delay in site possession, overloaded site instructions and changes at the project’s late stage.
He said in a letter to shareholders recently that “the loss of this size is a one-off situation that must not be repeated in the future.”
Added Abdul Hamed: “We believe we have weathered the worst storm in our group’s existence.”
Following the setback, Naim formulated a five-year recovery plan aimed to bring back the company to profitability.
In the third quarter to September 30, 2018 (3Q-2018), Naim made a strong recovery with group net profit of RM30.3 million from loss of RM95 million in 3Q-2017 as revenue more than tripled to RM178.8 million from RM53.6 million previously.
Dayang, of which Naim is the single biggest shareholder with a 26.4 per cent stake, also made a strong turnaround in 3Q-2018 with group net profit of RM48.8 million as compared to a mere RM1.1 million in 3Q-2017 as revenue rose to RM281.9 million from RM212.8 million during the same period.
On the proceeds from the rights issue, Naim said if the minimum sum of RM100 million is raised, RM70 million or 70 per cent will be utilised to fund property development activities and RM25 million for repayment of bank borrowings.
If the maximum RM159.9 million is raised, RM114.9 million and RM40 million will be channelled for property development and loan repayment respectively. Naim group’s total borrowings stood at RM545.4 million as at Dec 31, 2017.
For the remaining proceeds under both scenarios, RM4.2 million will be set aside as general working capital and RM800,000 for estimated expenses for the rights issue exercise.
The three major residential developments that would be financed by the proceeds from the rights issue are Kuching Paragon at Jalan Batu Lintang, Bintulu Paragon and Bandar Baru Permyjaya in Miri.
The Kuching Paragon, according to Naim, involves an on-going development of “Sapphire On The Park” condominium with gross development value (GDV) of about RM190 million.
The condominium project comprises three towers which would house a total of 427 units. The first 18-storey tower has been completed and occupation permit issued while the second 18-storey tower is over 40 per cent completed. Construction works has also commenced for the proposed third tower scheduled for completion in 1Q-2021.
Under the Bintulu Paragon project, a proposed 34-storey condominium named “The Peak” is in advanced construction. With a GDV of RM150 million, the proposed condominium is due for completion in 2Q-2019.
The Bandar Baru Permyjaya is Naim’s flagship development, which has now become a matured new township in the oil city. The on-going Southlake project spanning 450 acres and with an estimated GDV of RM180 million is in various stages of work progress, the most advanced of which has reached 85 per cent.
More affordable and medium-priced residential development with estimated GDV of RM70 million will next be launched there for scheduled completion in 1Q-2021.
Naim has sold more than 9,000 units of properties with GDV of some RM2 billion in Bandar Baru Permyjaya. With remaining landbank of 660 acres, the company expects to fully develop it over the next 15 years or beyond depending on market dynamics and economic situation.
Naim group has a current landbank of about 1,800 acres here and in Miri and Bintulu.
Besides property development, Naim’s other core business is construction, with a current outstanding order book of nearly RM2 billion. The single biggest project is a RM1.17 billion work package of the Pan Borneo Highway project which Naim is undertaking with Gamuda Bhd.
