KUALA LUMPUR (Nov 28): Minority shareholders of Toyo Ventures Holdings Bhd (TVHB) have been advised by Asia Equity Research Sdn Bhd (AER) to accept a proposal by the printing ink and precision mould maker to settle its outstanding debts of RM355.15 million, through the issuance of RM354 million nominal value of irredeemable convertible unsecured loan stocks (ICULS) to three creditors. The creditors are Ng Lu Siong @ Ng Soon Huat (NLS), Eng Lian (L) Inc (ELLI), and Bukit Asa Sdn Bhd (BASB).

In a circular filed with Bursa Malaysia on Tuesday, independent adviser AER said it is recommending shareholders to vote in favour of the resolution pertaining to the proposed settlement that is to be tabled at TVHB’s forthcoming extraordinary general meeting on Dec 13.

On Dec 27, 2022, TVHB had entered into a settlement agreement with the creditors to settle its debts of RM324 million, RM26 million and RM4 million to ELLI, BASB and NLS respectively as at Dec 22, 2022, via the issuance of 270 million, 21.67 million and 3.33 million ICULS to ELLI, BASB and NLS respectively, at an issue price of each ICULS at 100% of its nominal value of RM1.20. The ICULS have a tenure of five years and zero coupon. The remaining debts are RM1.15 million.

According to AER’s independent advice letter in the circular, AER pointed out that the issue price of RM1.20 for each ICULS is a premium of 40.75% to the five-day volume weighted average price of TVHB shares as at Dec 23, 2022. It is also a premium of 23.33% to the average traded price of 97.3 sen between March 31, 2012 to Dec 23, 2022.

The issue price is also a premium of 4.35% to the latest audited consolidated net assets (NA) per share of RM1.15 per share as at Sept 30, 2021, and equals to the latest audited consolidated NA per share of RM1.20 per share as at Sept 30, 2022.

“As the audited NA of TVHB as at end-September 2022 is RM1.20 per share, based on information available as at Dec 23, 2022, and using the NA approach, the fair value of ICULS is RM1.20 per share based on the NA of TVHB which equals to the issue price with no discount or premium. This means that the issue price is at its fair price. For all the reasons, we concluded that the issue price is fair and reasonable and not detrimental to the non-interested shareholders,” said AER.

Assuming that all of the creditors convert all of their ICULS into new TVHB shares, the direct shareholdings of ELLI and NLS are expected to increase from 7.85% and 0.85% as at Nov 8, 2023, to 48.88% and 1.05% respectively. Meanwhile, BASB’s shareholding is expected to decline from 8.17% to 7.59%.

Meanwhile, the public shareholding spread of TVHB is expected to decrease from 42.63% to 30.32%, which is in compliance with the requisite threshold of at least 25% of its total listed shares to be held by public shareholders.

AER also noted that the total liabilities of TVHB as at end-September 2022 was RM361.31 million. This will be reduced to RM7.31 million upon completion of the proposed settlement. The proposed settlement has the effect of increasing the NA and reducing the gearing ratio of the company.

“As at Sept 30, 2022, the group“s total cash and bank balance and short-term fixed deposits with licensed banks were RM18.19 million and RM900,000 respectively. We concluded that the amount is insufficient and considering that the project would require significant capital expenditure, this is not a suitable option,” said AER.

At noon market break on Tuesday, TVHB shares closed down two sen or 1.32% at RM1.49, with 78,000 shares done. Its market capitalisation  stood at RM184.56 million.