This article first appeared in The Edge Malaysia Weekly on August 14, 2023 - August 20, 2023

Last week, property developers Axteria Group Bhd and NCT Alliance Bhd announced that they were seeking to raise new capital through a private placement of shares.

Nothing unusual about it, except that the two companies have resorted to selling their shares through private placements one too many times.

In the latest exercise, Axteria, formerly Acoustech Bhd, is seeking to raise RM11.33 million for its immediate funding needs, specifically to continue the development of its Asteria Melaka (Block C) project. Already, the company has in place a redeemable convertible preference shares (RCPS) programme to potentially raise another RM31 million.

In a filing with Bursa Malaysia, Axteria says because its share price is now trading significantly below the RCPS minimum conversion price of 22 sen, it would not be meaningful for the RCPS subscriber to convert the RCPS into new Axteria shares. Thus, the company is exploring the private placement route to raise money. The stock closed at 17 sen last Friday.

Still, prior to this, Axteria had undertaken private placements in 2021 and 2022, raising a total of RM17 million. It subsequently undertook the share issuance to raise RM26.7 million.

Likewise, NCT Alliance, formerly Grand-Flo Bhd, is looking to raise RM54.42 million to fund its property development activities and for working capital.

NCT had previously undertaken a private placement that was completed in March this year, raising RM58.26 million. The company estimates that it will require RM477.6 million for its property development activities up to 2026.

Both companies have used the proceeds from the various placements to fund their ongoing development projects. To be fair, with higher interest rates, more companies could be resorting to the issuance of new shares to raise funds. Still, it does not bode well for Axteria and NCT to continue to rely on the sale of shares to raise capital. Not only will it reduce the ownership of existing shareholders, but it is also unsustainable. It’s time Axteria and NCT focused on increasing their sales and revenue from their bread-and-butter business of property development.

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