Founder Nathan to pare down stake in Eversendai?
Tan Sri AK Nathan

Corporate exercise to increase stock’s liquidity and pacify fund managers

By P PREM KUMAR / Pic By TMR

Eversendai Corp Bhd is planning a corporate exercise in the next 12 months to enlarge its share capital, subsequently reducing the shareholding of founder Tan Sri AK Nathan’s (picture) stake.

The move to increase the stock’s liquidity and pacify fund managers came after the construction company scrapped a proposed private placement in February this year.

Nathan said the company is engaging bankers and financial advisors to execute the exercise.

“The corporate exercise will allow me to value-add and enlarge the share capital of the company, while creating more liquidity in the market.

“I will definitely reduce my shareholding in the company via the exercise. I don’t see the necessity for me to hold over 70% (stake in Eversendai),” Nathan, who is also the chairman of the company, told The Malaysian Reserve (TMR) in Dubai recently.

Vahana Holdings Sdn Bhd, Nathan’s private vehicle, currently controls 71.11% of Eversendai, followed by private investor Koon Yew Yin with 9.33% and Lembaga

Tabung Haji with 5.16% interest. Eversendai has a paid-up share spread of 781 million. At 94 sen per share as of last Friday, the stock has a market capitalisation of RM734.1 million.

After the exercise, Nathan said Eversendai will have a larger pool of investors.

“It is to showcase to the investors at large that Eversendai is a company that they will be able to look forward to for continuous growth,” he said, adding that the move will also address the liquidity concern at the company.

“I am aware of the liquidity concerns expressed by analysts and fund managers everytime I meet them,” he said.

Eversendai scrapped a private placement plan to raise up to RM75.84 million last February. No reason was given behind the move.

The company also terminated a conditional share subscription pact with Macquarie Bank. On Aug 15 last year, Eversendai had proposed to undertake a private placement of up to 77.39 million new shares, representing up to 10% of the company’s total number of issued shares.

Based on an indicative issue price of 98 sen per placement share, the proposed private placement was to raise estimated gross proceeds of up to RM75.84 million, which was planned to be used to repay borrowings and working capital.

Although Nathan did not reveal the actual mode of the new corporate exercise, analysts are expecting for a potential private placement or injection of third-party assets into Eversendai, in return for new shares.

Kenanga Research analyst Lum Joe Shen told TMR that a corporate exercise is necessary for Eversendai — not necessarily just to boost liquidity, but also to address the non-compliance for public shareholding spread.

“Conventional corporate exercise such as rights and placement can be a little futile to address the public shareholding issue.

“They will need to thought-fully carve out a more special corporate exercise for this matter,” he said.

An analyst who did not want to be named said a new investor could inject assets or businesses into Eversendai, and in return get a significant stake in the firm.

While a private placement usually involves 10% of the entire paid-up shares, the analyst said injection of assets could involve a greater number of shares.

“If someone injects assets or businesses into Eversendai, the company has to issue new shares to be subscribed by the new investor. This will dilute Nathan’s stake.”

Kenanga Investment Bank Bhd has fixed an ‘Underperform’ note on Eversendai with a target price of 74 sen in its coverage note dated March 27, 2018.

Eversendai was listed on July 1, 2011, with a final institutional price of RM1.70 and retail price at RM1.62. On lis- ting day, Eversendai closed at RM1.72.

The share price reached its peak of RM1.80 on Aug 4, 2011, and has been on a downtrend since then. In the last 52 weeks, Eversendai’s share price was hovering between 69.5 sen and RM1.38, while average price target by fund managers and analysts stood at between 70 sen and RM1.05.

Eversendai registered a net profit of RM86.51 million, or 11.15 sen per share, for the financial year ended Dec 31, 2017, against a net loss of RM278.88 million or -36.04 sen per share in the previous year. Revenue also improved to RM1.83 billion from RM1.58 billion in 2016.

The revenue, however, failed to meet Nathan’s goal for Eversendai to register RM2 billion in turnover by 2018.

The structural steel fabricator has won projects worth up to RM533.9 between January-March 2018, bringing its total orderbook to RM2.5 billion.