Perdana Petroleum Bhd (Nov 16, 79.5 sen)
Maintain trading buy at 83.5 sen with target price of RM1.09: Perdana Petroleum has proposed to undertake a private placement of new shares, representing up to 10% of its existing issued shares. As at end-October, the company had an issued share base of 450.1 million and outstanding warrants of 61.4 million. If none of the outstanding warrants is exercised, the company may place out up to 45 million new shares. If all the outstanding warrants are exercised, it may place out up to 51.1 million new shares.
Assuming a placement price of 75 sen per share (representing a 4.2% discount to its five-day volume-weighted average price (VWAP), Perdana Petroleum may raise up to RM38.4 million of gross proceeds (or RM33.8 million under a minimum case scenario). The company intends to utilise the proceeds for working capital.
The corporate exercise is within market expectation and Dayang Enterprise Holdings Bhd (not rated) is purported to be the placee. To recap, on Oct 6, 2011, Perdana Petroleum announced in response to an article in The Edge weekly, Dayang may buy into Perdana Petroleum, that it was in exploratory/informal discussions with Dayang on strategic collaboration. During the discussion, the matter of financing was raised and Perdana Petroleum indicated that one of the ways the company may raise funds was to undertake a private placement. Dayang had indicated that it was interested in acquiring a strategic stake in the company.
We are neutral on the proposal. While the placement will be dilutive to earnings, we believe roping in Dayang is a decent strategic move and the cash proceeds (assuming placement price of RM0.75) will help lower the company’s net gearing ratio from 0.42 times to 0.33 times, thereby reducing its funding pressure. — Affin IB Research, Nov 16
This article appeared in The Edge Financial Daily, November 17, 2011.
Maintain trading buy at 83.5 sen with target price of RM1.09: Perdana Petroleum has proposed to undertake a private placement of new shares, representing up to 10% of its existing issued shares. As at end-October, the company had an issued share base of 450.1 million and outstanding warrants of 61.4 million. If none of the outstanding warrants is exercised, the company may place out up to 45 million new shares. If all the outstanding warrants are exercised, it may place out up to 51.1 million new shares.
Assuming a placement price of 75 sen per share (representing a 4.2% discount to its five-day volume-weighted average price (VWAP), Perdana Petroleum may raise up to RM38.4 million of gross proceeds (or RM33.8 million under a minimum case scenario). The company intends to utilise the proceeds for working capital.
The corporate exercise is within market expectation and Dayang Enterprise Holdings Bhd (not rated) is purported to be the placee. To recap, on Oct 6, 2011, Perdana Petroleum announced in response to an article in The Edge weekly, Dayang may buy into Perdana Petroleum, that it was in exploratory/informal discussions with Dayang on strategic collaboration. During the discussion, the matter of financing was raised and Perdana Petroleum indicated that one of the ways the company may raise funds was to undertake a private placement. Dayang had indicated that it was interested in acquiring a strategic stake in the company.
We are neutral on the proposal. While the placement will be dilutive to earnings, we believe roping in Dayang is a decent strategic move and the cash proceeds (assuming placement price of RM0.75) will help lower the company’s net gearing ratio from 0.42 times to 0.33 times, thereby reducing its funding pressure. — Affin IB Research, Nov 16
This article appeared in The Edge Financial Daily, November 17, 2011.
