Bromat Holdings Announces Renounceable Rights Issue to Strengthen Financial Position
Key Highlights:
- Bromat Holdings Ltd. proposes a renounceable, non-underwritten rights issue to raise up to S\$6.17 million in net proceeds.
- Issue price set at S\$0.042 per Rights Share, representing a significant discount of 52.27% to the last traded price of S\$0.088.
- Entitled shareholders can subscribe to one Rights Share for every two existing shares held.
- Valiant Investments Limited commits through an irrevocable undertaking to subscribe for 83,333,333 Rights Shares.
- Funds to be used for repaying advances, operating costs, and strategic investments.
Details of the Rights Issue:
The rights issue will offer up to 154,129,586 new ordinary shares at S\$0.042 each, a price heavily discounted from both the last traded price and the theoretical ex-rights price (TERP) of S\$0.073. The allotment ratio is one Rights Share for every two existing shares held, with fractional entitlements disregarded. Shareholders can renounce or trade their provisional rights on the Singapore Exchange Securities Trading Limited (SGX-ST) during the trading period.
The issue is non-underwritten, which will save on underwriting costs. However, Valiant Investments Limited has committed to subscribing for 83,333,333 Rights Shares, providing a level of assurance for the success of the issue. The maximum subscription scenario could raise S\$6.17 million in net proceeds, while the minimum subscription scenario would raise S\$3.5 million, effectively converting an existing advance from Valiant into equity.
Potential Shareholding Impact:
Under the maximum subscription scenario, the company’s share capital will increase to 462,388,758 shares, with the Rights Shares representing 33.33% of the enlarged share capital. Major shareholders like Gazelle Ventures Pte. Ltd. and Valiant Investments Limited will see their holdings diluted unless they fully subscribe to their entitlements. In the minimum subscription scenario, Valiant’s shareholding will account for 21.3% of the enlarged share capital, while the collective shareholding of public shareholders will dilute from 24.5% to 19.3%, potentially affecting market sentiment.
Intended Use of Proceeds:
- S\$3.5 million from the proceeds will be used to set off an advance provided by Valiant Investments Limited.
- The remaining S\$2.67 million will fund general corporate purposes, including operating costs, strategic investments, and potential acquisitions.
The funds will enhance the company’s financial flexibility to execute its strategic initiatives, including the rebranding of its food and beverage business and the integration of Dining Haus Pte. Ltd., acquired earlier this year.
Rationale and Financial Impact:
The board cited rising competition in the food and beverage industry and the need to bolster financial resources as the primary reasons for the rights issue. Under the maximum subscription scenario, the company’s unaudited net liability of S\$3.84 million as of June 30, 2024, would turn into a net asset position of S\$2.33 million, significantly improving its balance sheet.
Important Notices for Shareholders:
- The rights issue is only available to shareholders with Singapore-registered addresses as of the record date. Foreign shareholders will not be eligible to participate.
- Shareholders are advised to read the Offer Information Statement carefully when it is released.
Potential Price Sensitivity:
The heavy discount on the issue price compared to the last traded price may result in short-term downward pressure on the stock. However, the potential to strengthen the company’s financial position and support its growth initiatives could be a long-term positive for shareholders who believe in the company’s strategic direction.
Disclaimer:
This article is for informational purposes only and does not constitute financial advice. Shareholders and investors are urged to consult their financial advisors before making any investment decisions. The information provided is based on the company’s announcement and is subject to change.
