KUALA LUMPUR (Feb 27): Shares of MBM Resources were the top loser on Monday on investors’ concerns of earnings per share (EPS) dilution after it proposed a renounceable rights issue of 73.65 million.
At 12.30pm, it was down 20 sen to RM4.42 with 1.20 million shares done. It fell to an intra-morning low of RM4.37.
The FBM KLCI was up 2.66 points to 1,561.43. Turnover was 851.34 million shares valued at RM730.13 million. There were 340 gainers, 330 losers and 310 stocks unchanged.
However, the decline in the share price would also be due to profit taking since the share price had risen from RM3.69 on Jan 27. It reached an intra-day high of RM4.96 last Friday before closing at RM4.62.
Last Friday, MBM Resources had proposed a bonus issue of up to 73.65 million new shares on the basis of three bonus shares for every 10 existing shares held.
It also proposed the rights issue of up to 73.65 million new rights shares together with up to 73.65 million new free detachable warrants on the basis of three rights shares with three free warrants for every 10 existing shares.
OSK Research said MBM Resources’s FY11 earnings were within estimates.
“Given the group’s aggressive expansion, it has announced a rights issue with detachable warrants to fund its plans, as well as a bonus issue to reward shareholders and boost liquidity in its stock,” it said.
The research house said while the enlarged share base and potential 38% dilution to EPS were cause for concern, “we think there is potential price upside as MBM’s total consolidated earnings (including that from newly-acquired Hirotako), could surge by some 50% in FY12”.
“With the stock’s better liquidity and dominance in the auto industry, our SOP-based FV is RM5.34. Hence, we upgrade MBM from SELL to BUY,” said OSK Research.
At 12.30pm, it was down 20 sen to RM4.42 with 1.20 million shares done. It fell to an intra-morning low of RM4.37.
The FBM KLCI was up 2.66 points to 1,561.43. Turnover was 851.34 million shares valued at RM730.13 million. There were 340 gainers, 330 losers and 310 stocks unchanged.
However, the decline in the share price would also be due to profit taking since the share price had risen from RM3.69 on Jan 27. It reached an intra-day high of RM4.96 last Friday before closing at RM4.62.
Last Friday, MBM Resources had proposed a bonus issue of up to 73.65 million new shares on the basis of three bonus shares for every 10 existing shares held.
It also proposed the rights issue of up to 73.65 million new rights shares together with up to 73.65 million new free detachable warrants on the basis of three rights shares with three free warrants for every 10 existing shares.
OSK Research said MBM Resources’s FY11 earnings were within estimates.
“Given the group’s aggressive expansion, it has announced a rights issue with detachable warrants to fund its plans, as well as a bonus issue to reward shareholders and boost liquidity in its stock,” it said.
The research house said while the enlarged share base and potential 38% dilution to EPS were cause for concern, “we think there is potential price upside as MBM’s total consolidated earnings (including that from newly-acquired Hirotako), could surge by some 50% in FY12”.
“With the stock’s better liquidity and dominance in the auto industry, our SOP-based FV is RM5.34. Hence, we upgrade MBM from SELL to BUY,” said OSK Research.
