Dayang: a better proposal to replace share placement

Koon Yew Yin 21 Nov 2019 

Dayang share price has shot up 9 sen and 18 sen in the last 2 trading days respectively. The rapid rise of the share price is due to investors’ anticipation of a better 3rd profit announcement in the coming few days and also the right to buy 1 share at 92 sen if any shareholder has 10 shares. 

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In view of this successful fund raising exercise, I am encouraged to write this article. I have a better proposal to replace the proposed share placement. I believe my wife, my relatives and I have enough of shares to request for an EGM to seek shareholders’ approval of my proposed resolution as follows:  

For easy understanding, allow me to demonstrate to you with figures. Assuming the price is Rm 2.00 per share. 

Together with the right issue of 1 for every 10 shares held by shareholders, the total number of shares issued is 960 million + 96 million = 1056 million. 

Share placement:

The number of placement shares is 10% of the total issued shares which is 105.6 million. 

Assuming the company offers the maximum discount of 10%, as according to KLSE rule, the selling price will be Rm 1.80 per share. The company will receive 105.6 X Rm 1.80 = Rm 190.08 million.  

My right issues proposal:

The company offers 1 right issue with 1 free convertible warrant for every 5 shares held by shareholders. Shareholders should be very happy to buy the right issues because they can easily sell the free warrants in the open market. Giving out free convertible warrants is like giving out cash ‘cash ang pow’ to the shareholder.   

The total number of shares for the right issues will be 1056 million divided by 5 = 211.2 million.

According to KLSE rule the company can offer 50 % discount which is Rm 1.00 per share as what the company did previously.  

The total sum the company will receive will be 211.2 X Rm 1.00 = Rm 211.2 million. 

From share placement the company will receive Rm 190.08 million.

From right issues the company will receive Rm 211.2 million. The company will also receive Rm 211.2 X Rm 2.00   (assuming  the conversion price is Rm 2.00) = Rm 422.4 million when all the warrants are converted. 

I believe all shareholders will support my proposed resolution of right issues with free convertible warrants because the company and themselves will benefit a lot more than share placement. The company must also bear in mind that shareholders would feel cheated if the company sell the placement shares with a discount from the open market price. Moreover, they should also know that their interest will be diluted due to the 10% of the total issued shares for share placement.    

To avoid calling an EGM just to seek shareholders’ approval of my proposal, I believe all company directors are smart enough to call an EGM to seek shareholders’ approval of my proposed right issues with free convertible warrants.    

I can visualize that as soon as the company calls for an EGM to seek shareholders’ approval for the right issues with 50% discount of the open market price and free convertible warrants the share price will shoot higher and higher. 

I trust the Board of Directors will consider my proposal seriously without requiring me to call for an EGM. 

Even if the oil price dropped drastically by 50%, Petronas will continue to pump oil because the cost of the oil rigs have been paid already. All the oil rigs require maintenance and Petronas will continue to award more maintenance contracts to Dayang. As a result, the company will continue to make more and more profit. I believe Dayang has very good profit growth prospect. That is why 90% of my investment is Dayang.   

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