KUALA LUMPUR (Dec 19): Malacca Securities Sdn Bhd has advised minority shareholders of Southern Steel Bhd (KL:SSTEEL) to vote in favour of the company’s proposed issuance of new shares to Singapore-based steel firm Green Esteel Pte Ltd.
The independent adviser opined that the proposal is “fair and reasonable”, according to Southern Steel’s circular to shareholders on Thursday.
This issuance, which will raise approximately RM315.86 million for Southern Steel, provides "a degree of certainty" of the fundraising, Malacca Securities said.
It also lauded the impending plant upgrades from the fundraising, as well as synergies between Southern Steel and Green Esteel, who will emerge as a 50.1% shareholder post-issuance.
The equity fundraising — together with a proposed private placement to raise RM64.15 million — would let Southern Steel avoid paying an estimated RM19.22 million annual interest expense that would otherwise be incurred from debt fundraising, it added.
That said, Malacca Securities highlighted the steep discount of the issuance, which is 55.8% cheaper than Southern Steel's net asset per share at end-June, and the dilution of about 60.28% for existing Southern Steel shareholders.
“We recommend you vote in favour of the ordinary resolution pertaining to the proposed exemption to be tabled at the forthcoming EGM (extraordinary general meeting) [scheduled for Jan 3, 2025],” Malacca Securities said.
Southern Steel is issuing 752.06 million shares at 42 sen apiece for a total of RM315.86 million to Green Esteel, who seeks to maintain Southern Steel's Main Market listing status.
After completion of the proposed issuance of shares, Southern Steel also planned to undertake a private placement of up to 152.74 million new shares to third-party investors at an issue price of 42 sen per placement share, representing up to 10.18% of the enlarged issued capital. This will raise proceeds of up to RM64.15 million.
Shares of Southern Steel settled unchanged at 51.5 sen on Thursday, valuing the group at RM307.10 million. The counter has dropped 22% year-to-date.