KUALA LUMPUR (Oct 15): Citaglobal Bhd (KL:CITAGLB) has proposed a capital reduction of RM255 million to wipe out its accumulated losses and create retained earnings to enable a share buyback.

In its bourse filing on Thursday, the group said the credit arising from the capital reduction will be used to set off the group's accumulated losses of RM217.72 million as at June 30 in full, with the remaining balance of RM37.06 million credited to retained earnings.

Citaglobal said the accumulated losses were mainly attributable to historical operating losses and impairment of investments in subsidiaries incurred prior to its turnaround initiatives undertaken from 2021 onwards.

It added that the capital reduction will not alter the total number of issued shares, result in any share price adjustments, or involve any cash outflow or payment to shareholders, except for estimated expenses of RM228,000 for the proposals.

Under the share buyback plan, Citaglobal seeks to repurchase up to 56.33 million shares, representing up to 10% of its total issued shares of 563.31 million as at Sept 30.

Based on an illustrative five-day volume-weighted average market price of RM1.07 per share, the full buyback would cost approximately RM60.27 million, which will be funded via internally generated funds and external borrowings.

The group noted that the capital reduction and share buyback authority will give the board flexibility to purchase shares when trading below intrinsic value, stabilise share price volatility, and enhance earnings per share and return on equity over time.

Barring any unforeseen circumstances, the capital reduction is targeted for completion by the first quarter of 2027, subject to shareholders' approval at an upcoming extraordinary general meeting.

Citaglobal shares closed seven sen or 7.37% higher at RM1.02 on Thurday, giving the group a market capitalisation of RM574.63 million.