KUALA LUMPUR (April 30): Priceworth International Bhd has proposed the consolidation of every 10 of its shares into one share, along with the issuance of notes of up to RM100 million.

The share consolidation will enhance its capital structure, and will not have any impact on the market value of its shares, the group said in a bourse filing.

"Further, as the company currently has a large number of shares in issue and a relatively low trading price range, a small absolute movement in the share price may be significant in percentage terms. Consolidating the company shares would lead to a reduction in the number of shares available in the market and should potentially reduce the volatility in the trading price," it added.

The group said its issued share capaital stood at RM377.48 million comprising 4.5 billion shares as at April 28.

Noting that its shares were trading at two sen apiece on April 28, Priceworth said that based on this price, the theoretical adjusted reference share price for its shares would be at 20 sen once the consolidation is completed.

On its note issue, the group said it will be issuing 2% redeemable convertible notes, due in 2024, worth RM100 million in aggregate nominal value. Holders of the notes can convert them into new shares in Priceworth. The conversion price has been set at 12 sen per share.

The group said it has signed a conditional subscription agreement with Advance Opportunities Fund (AOF) and Advance Opportunity Fund (AOF 1) for the notes, which will be issued in four tranches.

It added that RM30 million of the proceeds from the notes issuance will be used to repay bank borrowings, and RM62.6 million will be used as infrastructure for its logging business, with the balance used to defray the expenses associated with the move.

The amount spent on its logging business includes items for the segment's logging and manufacturing activities, said Priceworth.

It noted that following the maximum of amount of shares converted from the notes issuance (818.98 million shares), its share capital could increase to 1.27 billion shares, after factoring in the share consolidation exercise.

Meanwhile, its borrowings would decline to RM5.74 million following the conversion of the notes, from RM35.74 million as of June 30, 2020. Its gearing ratio would decline from 0.17 times to 0.02 times.

The proposals are subject to shareholders' approval at an extraordinary general meeting. Kenanga Investment Bank is the principal adviser and lead arranger and lead manager and facility agent for the notes issue.

"Barring unforeseen circumstances and subject to all requisite approvals being obtained, the proposed share consolidation is expected to be completed by the second half of 2021 and accordingly, the first sub-tranche of Tranche 1 Notes should also be available for issuance by the second half of 2021," it added.

Shares in Priceworth finished 0.5 sen or 25% higher at 2.5 sen today, valuing the group at RM112.61 million. The counter saw 2.72 million shares traded.