KUALA LUMPUR (March 10): Pestech International Bhd (KL:PESTECH) is raising a further RM27.81 million through a restricted issue of shares to its newly emerged controlling shareholder, Dhaya Maju Infrastructure (Asia) Sdn Bhd (DMIA), to fund ongoing projects.
This marks the struggling rail infrastructure company's second restricted issue within six months.
Upon completion of the restricted issue, DMIA’s stake in Pestech will rise to 61.39% from 57.52% currently, further tightening its grip on the company, according to Pestech’s filing to Bursa Malaysia.
DMIA has secured an exemption from regulators, relieving it of the obligation to make a mandatory general offer for the remaining shares in Pestech.
In the bourse filing, Pestech, which has been blamed by Malaysia Airports Holdings Bhd for the delay in the aerotrain replacement project in KLIA, said it entered into a conditional subscription agreement with DMIA, a privately owned rail construction company, for the issuance of 231.79 million new shares at 12 sen per share. The issue price is at almost 28% discount to the stock's five-day volume-weighted average price (VWAP) of 16.64 sen.
The placement accounts for 10% of the company’s existing issued shares, diluting to approximately 9.09% post-issuance.
DMIA emerged as a controlling shareholder in Pestech after it subscribed to 1.33 billion shares in Pestech for RM160 million or 12 sen apiece. The restricted issuance was approved by Pestech shareholders at an extraordinary general meeting on Dec 10, 2024.
The emergence of DMIA as Pestech’s largest shareholder followed IJM Corp Bhd’s (KL:IJM) decision to abort its plan to acquire a 44.83% stake in Pestech for RM124 million, due to unmet conditions.
Proceeds from the latest restricted issue will primarily go towards working capital, with RM27.31 million allocated to fund ongoing projects, including payments to suppliers, subcontractors, and materials costs. The remaining RM500,000 will cover the expenses of the fundraising exercise.
Pestech’s board said the urgent cash infusion is necessary to support project execution, as the company remains under financial pressure from previous losses and constrained access to bank financing due to its ongoing pre-packaged scheme of arrangement with creditors.
"The proceeds from the proposed restricted issue is crucial, particularly in light of the abovementioned challenges in obtaining financing from financial institutions. In the event the group is unable to raise additional funding to meet the group’s working capital requirements, its financial liquidity would be negatively impacted, which may then affect the progress of its existing ongoing projects," said the company.
"Further, the additional investment by DMIA, demonstrates DMIA’s confidence in the group’s long-term prospects and reflects its further commitment to support the group's growth and success," Pestech added.
As of end-2024, Pestech had RM974.83 million in total loans and borrowings plus RM82 million in perpetual sukuk, against cash and short-term deposits of RM212.34 million. Trade receivables stood at RM167.28 million, against trade payables of RM429.36 million.
Pestech’s accumulated loss stood at RM100.15 million, against its share capital of RM392.94 million.
Shares in Pestech closed unchanged at 16.5 sen on Monday, with a market capitalisation of RM383.72 million.