KUALA LUMPUR (July 24): Nationgate Holdings Bhd (KL:NATGATE) intends to issue new shares to raise RM429.3 million at a price that is five times more than its initial public offering (IPO) of 38 sen per share that was achieved barely 19 months back.

The electronic manufacturing services (EMS) provider, which has gotten approval for the transfer to the Main Board, proposed a private placement of 207.39 million new shares or 10% of its enlarged share base to raise fresh working capital.

According to its filing with Bursa Malaysia, a total of RM425.16 million of the gross proceeds, based on the price assumption of RM2.07 per share, would be allocated for working capital to purchase electronic components used in its EMS activities.

Meanwhile, the remaining RM4.15 million would be used for estimated expenses related to the proposed private placement.

The assumed issue price of RM2.07 per share represents a discount of about 9.61% to the five-day volume-weighted average market price of RM2.29 as of July 23.

Nationgate said the group is focusing on expanding its existing manufacturing capacities to meet the anticipated surge in orders from major customers, particularly in the networking and telecommunications industries. It is also preparing to handle an increase in assembly tasks from customers in the data computing, consumer electronics, automotive and semiconductor industries.

“The group is also committed to continuously expanding talent resources to effectively serve new businesses from both existing and potential customers,” it said.

The proposed private placement is the most suitable method for the group to raise funds without incurring interest expenses or principal repayments, as opposed to conventional bank borrowings, said Nationgate in the filing.

This proposed exercise will provide long-term equity capital for the group and further strengthen its capital structure, it explained.

As at March 31, its cash and bank balance amounted to RM75.25 million, plus RM12.68 million in short-term deposits. Its short-term borrowings stood at RM146.42 million, while long-term loans came in at RM20.09 million.

The group’s total equity would expand from RM422.06 million to RM847.21 million upon completion of the proposed private placement. Additionally, net assets per share would increase from 20 sen to 37 sen, and its gearing ratio would decrease from 0.28 times to 0.14 times due to the enlarged shareholder equity.

The exercise is expected to be completed by the third quarter of 2024, with Maybank Investment Bank (Maybank IB) appointed as principal adviser and sole placement agent.

For the first quarter ended March 31, 2024, Nationgate’s net profit climbed 58% to RM21 million from RM13.29 million in the same period a year earlier, as revenue grew 31.5% to RM207 million from RM157.41 million.

However, its earnings contracted for the financial year ended Dec 31, 2023 (FY2023). Annual revenue was down 32.5% to RM638.29 million from RM945.7 million the year before, as net profit shrunk to RM60.9 million against RM85.6 million previously.

Nationgate’s share price fell one sen to RM2.27 on Wednesday, giving it a market capitalisation of RM4.71 billion. The stock has gained RM1.89 or 497% against its IPO price of 38 sen.