Sanichi's Mind Boggling 44% Private Placement!

Published on the Edge Financial Daliy: Sanichi proposes 44% private placement

• KUALA LUMPUR: SANICHI TECHNOLOGY [] BHD [] has proposed a private placement of up to 50 million new shares of 10 sen each, representing 44.05% of its existing paid-up capital, to raise additional working capital and to repay borrowings.
  
  In a statement yesterday, Sanichi said its paid-up capital would be increased to 163.5 million shares, and the placement shares would represent about 30.58% of the enlarged capital.
  
  It will place out the shares, via MIMB Investment Bank Bhd as the placement agent, to investors to be identified at a later stage. The ACE Market-listed company designs and fabricates precision moulds and tooling.
  
  The private placement proposal would need its shareholders’ approval. Sanichi said it would also obtain its shareholders’ approval in the event that the shares were issued to its major shareholders, directors and/or its chief executive, and/or persons connected with them.
  
  Sanichi said in order to maximise the proceeds and subject to market conditions, the proposed private placement may be implemented in tranches.
  
  Assuming an indicative issue price of 10 sen per share, it would raise up to RM5 million, which would be used for working capital (RM2.85 million) and repayment of bank borrowings (RM2 million) as well as to defray related expenses.
  
  Sanichi said based on the group’s unaudited financial statements as at June 30, 2009, its gearing ratio was about 0.92 times.
  
  “With regard to internally targeted levels for the company’s gearing and interest servicing position, it is the board’s opinion that any fund-raising exercise at this juncture should be in the form of equity rather than debt,” it said.
  
  Sanichi said assuming an average borrowing cost of 5.5% per annum, the repayment of bank borrowings of RM2 million would result in estimated interest savings of about RM110,000 per annum.
  
  It expects the application to Bursa Malaysia Securities Bhd for the proposed private placement to be made within two months, and the exercise to be completed during the last quarter of 2009.
  
  
  This article appeared in The Edge Financial Daily, September 16, 2009.

There goes the neighbourhood!

A 44% private placement????

This would mean that the minority shareholders would see 44% dilution in their earnings per share for their investment in Sanichi!

A 44% dilution!

What on earth is happening here?

Wasn't there a limit on the how much you can place out?

If this keeps going on, what's the point of even investing?

Sigh!