Pharmaniaga shares slip on 3Q net loss, capital reduction plan

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KUALA LUMPUR (Nov 30): Shares in Pharmaniaga Bhd fell in early trade on Thursday, after the pharmaceutical group proposed a regularisation plan that consists of a capital reduction exercise, renounceable rights issue of news shares plus private placement, to raise up to RM654.61 million to pare down debts.

At 9.11am, Pharmaniaga had fallen 7.41% or three sen to 37.5 sen, with 1.15 million shares traded. The stock earlier slipped to a low of 36 sen.

The group reported a net loss of RM49.34 million for the third quarter ended Sept 30, 2023 (3QFY2023), more than double the RM13.99 million quarterly net loss it logged a year earlier.

The wider net loss was due to a one-off provision of RM65.2 million stock obsolescence from its expiring pandemic-related consumables inventory, such as personal protective equipment and needles.

Quarterly revenue was marginally lower at RM885.49 million, against RM894.94 million last year, mainly due to lower sales within its non-concession business, stemming from the loss of a tender exercise for a blood cancer product.

Hong Leong Investment Bank (HLIB) in a note on Thursday said the regularisation plan is anticipated to lead to a substantial dilution for existing shareholders.

HLIB said Pharmaniaga aims to potentially raise up to RM654.6 million, of which 40.3% will be allocated for debt repayment, while 24.5% will be used as working capital, and 33.9% for business expansion.

It said the remaining 1.3% will cover exercise expenses. Upon successful implementation of the proposed regularisation plan and assuming full exercise of warrants, Pharmaniaga’s share base is projected to increase to 4.56 billion shares (from the existing 1.44 billion shares), translating into a significant dilution.

The proposed regularisation plan will be submitted to Bursa Malaysia for approval in the first quarter of 2024, while the listing of the rights shares, warrants and placement shares is expected to take place in the third quarter.

HLIB has ceased coverage of Pharmaniaga due to the reallocation of its resources.

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