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Kindly be advised that 780,342,595 ICULS issued pursuant to the Rights Issue will be admitted to the Official List of Bursa Securities and the listing and quotation of the ICULS on the Main Market under the “Consumer Products & Services” sector, will be granted with effect from 9.00 a.m., Friday, 5 April 2024.
Arbitrage Opportunity Abounds In Techbase Industries’ Rights Issue
IN THE ever-evolving landscape of the Malaysian corporate sector, Techbase Industries Bhd’s (formerly Prolexus Bhd) recent rights issue could present an intriguing arbitrage opportunity for astute investors.
Delving into the details of this corporate exercise and its implications, it is clear that this is more than just a routine capital-raising endeavour.
Techbase has unveiled a renounceable rights issue of up to RM102.58 mil nominal value of 2.05 billion five-year 0.10% irredeemable convertible unsecured loan stocks (ICULS) at 100% of its nominal value of 5 sen each.
This rights issue is on the basis of five (5) ICULS for every one (1) existing ordinary share of Techbase held by entitled shareholders as at 5pm on March 4, 2024.
Arbitrage opportunity
As of Friday’s (March 8) close, Techbase’s share price stood at 25 sen which is its post-ex-rights’ price.
For investors holding the mother shares, the ICULS comes at a cost of 5 sen. Given the conversion price of 15 sen for the ICULS, this presents a significant arbitrage opportunity where the cost of converting to mother share is just 20 sen.
Investors can potentially gain from the difference between the current share price and the conversion price, making this an attractive proposition for those looking to capitalize on short-term gains.
Techbase has a diversified business portfolio with a proven track record in the apparel industry. The company has been exploring various strategic initiatives to enhance its operational efficiency and market positioning.
In the past year, Techbase had attempted to organise an extraordinary general meeting (EGM) concerning property developer South Malaysia Industries Bhd (SMI) but was not successful.
However, with SMI’s AGM (annual general meeting) scheduled for March 2024, the corporate scene in Malaysia is abuzz with speculation about what might transpire and how it could impact the dynamics between these two entities.
The proceeds from Techbase’s rights issue are earmarked for several strategic initiatives, including the installation of rooftop solar photovoltaic systems, bolstering working capital, repaying bank borrowings and exploring acquisitions or investments in complementary businesses.
These initiatives are expected to create value for the group by enhancing operational efficiency, reducing costs and paving the way for sustainable growth.
The upcoming AGM of SMI and Techbase’s potential involvement in its board could have significant implications for the corporate landscape in Malaysia.
It remains to be seen how this will unfold but it is clear that Techbase is positioning itself as a key player in the apparel industry with strategic moves that could re-define its future trajectory and impact the broader corporate scene.
In conclusion, Techbase’s rights issue presents a unique arbitrage opportunity for investors, backed by strategic initiatives that aim to create long-term value for the company.
As the corporate saga between Techbase and SMI continues to unfold, it will be interesting to observe how it shapes the future of these companies and the Malaysian corporate sector at large.
At 3.50pm, Techbase was up 0.5 sen or 2% to 25.5 sen with 10.46 million shares traded, thus valuing the company at RM71 mil.
I think It's a solid investment, seriously. Big discount to net assets, loads of cash in hand, and potential value from their SMI subsidiary. Additionally, with a fat war chest post-rights issue and recent share price dips, it's the perfect moment to jump in and make some serious gains. Personal opinion only
Its Q2 result was out. Revenue improved in terms of QoQ and YoY, whereas net loss was narrowed. Seems like a good opportunity as its price is almost at the bottom
Correct me if I'm wrong
1. Each ICULS costs RM0.05
2. Capital remains RM0.20 per share, regardless of the conversion method
3. Sell at the theoretical ex-rights price of RM0.235 to RM0.240 results in a profit
4. Even if the share price drops to RM0.220 after theoretical ex-rights price, you still make at least a 10% gain
5. For each Techbase share you hold, you can subscribe for 5 ICULS
6. In the end there's a potential 50% profit based on the conservative ex-right price estimated
