KUALA LUMPUR (July 19): Malaysia Steel Works (KL) Bhd (KL:MASTEEL) plans to raise up to RM31.69 million by placing out 10% of its enlarged share base, primarily to fund its working capital.

The company intends to issue up to 90.55 million shares to third-party investors who will be identified later. The sum to be raised is based on an indicative issue price of 35 sen per share, a discount of 6.52% (or 2.44 sen) to the stock's five-day volume-weighted average price of 37.44 sen as of July 12.

Masteel may raise RM23.7 million under the minimum scenario, where all its treasury shares are retained and none of its outstanding warrants exercised prior to the placement, or RM31.69 million under the maximum scenario, where all its treasury shares are resold to the open market and its outstanding warrants exercised, according to the steel bar manufacturer’s filing with the stock exchange.

The company has not engaged in any equity fund-raising exercises in the past 12 months. As of end-March, its cash and bank balances stood at RM34.63 million, with RM427.61 million in short-term borrowings and RM54.23 million in long-term borrowings.

“In anticipation of an improvement in local demand for steel products, Masteel will continue to maximise its new steel making facilities and explore export opportunities of its steel products to regional markets where demand remains firm,” the group said.

“The company has recently received the approval for CARES certification (the abbreviation for UK Certification Authority for Reinforcing Steels), which will allow the company to export its steel products to neighbouring countries such as Singapore, Hong Kong and UK,” it added.

The proposed private placement, expected to be completed in the second half of this year, will lower Masteel’s gearing ratio to 0.51 times and net assets per share to 99 sen under the maximum scenario.

Masteel's net profit for its financial year ended Dec 31, 2023 dived to RM2.4 million from RM19.07 million in FY2022, despite revenue expanding to RM2.01 billion from RM1.78 billion on higher sales of steel products, as earnings were dragged by higher utilities and finance costs.

For its first quarter ended March 31, 2024 (1QFY2024), Masteel recorded a net profit of 3.14 million, up from RM651,000 in 1QFY2023, as revenue rose to RM662.51 million from RM470.03 million.

Shares of Masteel closed down one sen or 2.6% at 37.5 sen on Friday, giving it a market capitalisation of RM251.48 million.