KUALA LUMPUR (March 21): Press Metal Aluminium Holdings Bhd (PMAH) plans to raise up to RM1 billion, through the placement of up to 163.4 million new shares or 2% of its issued shares to third party investors, to be used as working capital, capital expenditure (capex) and to repay its borrowings.

The funds will be mainly used for the group's working capital, capex and loan repayments, PMAH said in a bourse filing on Monday.

While the actual issue price for the placement shares will be determined and announced later, the placement for now assumes an issue price of RM6.12 per share for illustration purposes.

Of the RM1 billion proceeds, the bulk or RM670 million will be used for working capital, which is intended to finance the group's day-to-day operations.

This, said PMAH, is mainly due to an increase in raw material purchases due to a general increase in prices coupled with the disruption of logistics as a result of the Covid-19 pandemic and the Russia-Ukraine conflict, which also resulted in the group having to maintain higher inventory levels.

It then plans to set aside RM210 million for capex such as for its extrusion and smelting operations, as well as its sustainability projects.

The remaining RM120 million will be used to repay bank borrowings, including working capital trade lines, bankers' acceptances or term loans of the group.

Based on PMAH's audited consolidated statement as at Dec 31, 2021, the group's gearing will decrease from 1.29 times to 1.01 times after the proposed placement, while earnings per share will decrease from 5.7 sen to 5.6 sen.

PMAH believes that the proposed placement will allow the company to raise additional funds without incurring interest costs or service principal repayments. It is also an expeditious way of raising funds in the capital market compared to other alternative fundraising methods.

The exercise, which would enlarge PMAH's capital base, is expected to strengthen the group's and its subsidiaries' financial positions.

It expects the exercise to be completed by the second quarter of this year.

PMAH shares closed unchanged at RM6.35, giving it a market capitalisation of RM51.28 billion. The stock has risen 12.19% year-to-date from RM5.66.