Kelington proposes bonus issue to reward shareholders


KELINGTON Group Bhd proposed for a bonus issue of up to 322.62 million shares on the basis of one bonus share for every share held on an entitlement date which will be announced by the board.

In a Bursa filing yesterday, Kelington noted that the proposal serves to reward its shareholders and increase the number of shares held by shareholders at no cost to the shareholders.

The corporate exercise also proposed an issuance of up to 215.08 million warrants on the basis of one warrant for every three shares held as well.

The free warrants serve to reward the shareholders by providing them the option to increase their equity participation in Kelington by exercising the warrants at a pre-determined price over the five-year tenure of the warrants.

“For the company, the conversion will potentially provide additional funds for working capital needs,” said the group’s CEO Raymond Gan.

The gross proceeds to be raised upon full exercise of the warrants are RM209.71 million based on the indicative exercise price of 97.5 sen.

Proceeds raised will be used to partly finance the acquisition of assets for the industrial gas business division, working capital and partially repay bank borrowings, term loans and leases, the company stated in its release yesterday.

The proposed bonus issue of shares and warrants is expected to be completed in the third quarter of this year.

Kelington has also proposed a diversification into manufacturing, distribution and trading of industrial and specialty gases.

The company noted that the expansion of industrial gases business is in accordance with its business and growth strategy to further enhance the operations and financial performance of industrial gases business, which could potentially provide the company sustainable revenue and income stream moving forward.

“The group’s financial contribution was solely attributable to the construction segment, of which the construction and engineering project orders are highly dependent on the capital expenditure activities of its customers,” it said in the filing.

The plan to manufacture and trade industrial gases aims to capture the opportunities within the business, which may reduce Kelington’s current reliance on its construction segment moving forward and enhance the group’s future financial performance.

Kelington stated that the anticipated earnings visibility is supported by several factors, among which include its track record in the business over the past three years which registered an increase of revenue to RM22.1 million in 2020 from RM3.6 million in 2018.

“The company is seeking the approval from its shareholders for the proposed diversification as the expansion of industrial gases business is anticipated to contribute 25% or more of the net profits of the group, and/or result in a diversion of more than 25% of the net assets of the group towards the aforesaid new business activities moving forward,” it said.

At present, Kelington said the industrial gases business, specifically the manufacturing of liquid CO2, is mainly targeting the semi-conductor and electronics industry.

Moving forward, the group intends to expand its market segment to include end-users, such as the food and beverages (F&B) industry that consumes larger amounts of liquid CO2 for the production of carbonated drinks and frozen food.

“In conjunction with this expansion plan, the group had obtained the Food Safety System Certification (FSSC 22000), particularly for food safety/quality management system certification for its manufacturing, storage and distribution of liquid CO2 activities for the F&B industry in October 2020,” it added.