KUALA LUMPUR (Sept 4): Hengyuan Refining Company Bhd (KL:HENGYUAN) said its major shareholder, Malaysia Hengyuan International Ltd (MHIL), has undertaken to subscribe for its full entitlement under the group's rights issue.
"This commitment secures the minimum fundraising of RM155 million under the exercise," Hengyuan said in a bourse filing on Thursday, noting that the group is now on track to raise up to RM300 million through the exercise.
The rights issue involves the issuance of up to 300 million new shares and up to 150 million free detachable warrants. This will be offered on the basis of one rights share for every share held, and one warrant for every two rights shares subscribed for.
The bulk of proceeds from the exercise is intended for the purchase of additional crude oil feedstock, said Hengyuan, which remains as the primary supplier of Shell refined products in Peninsular Malaysia. The group has also broadened its customer portfolio to include Petronas, Petron and Five.
About 90% of Hengyuan’s refined products are sold domestically, with the remainder exported within Southeast Asia.
Hengyuan, which is 51.02%-owned by MHIL, said that up to RM300 million will be raised from the rights shares, based on an illustrative price of RM1.
Should the warrants be fully exercised, Hengyuan could raise an additional RM211.5 million, based on an illustrative price of RM1.41 for the five-year warrants.
Hengyuan said it is targeting a return to profitability by 2026, and subject to that, the board will also consider resuming dividends in the future.
Its chief financial officer Yeo Bee Hwan said the group has invested more than RM2.2 billion in capital expenditure over the past five years to enhance production capabilities and expand into higher-value products, such as sustainable aviation fuel and Euro 5 gasoil.
The group has been in the red over the past three financial years. From a loss after tax of RM158 million in the year ended Dec 31, 2022 (FY2022), the loss worsened to RM489 million in FY2023, before narrowing to RM358 million in FY2024.
The group continued to bleed in the first half of FY2025, with net loss widening to RM353.69 million from RM198.34 million for the previous January-June period. Six-month revenue declined 39% year-on-year to RM5.89 billion from RM9.61 billion.
Hengyuan's share price closed two sen or 1.65% lower at RM1.19 on Thursday. Year to date, the stock has declined 45%.