KUALA LUMPUR: Affin Hwang Capital Research said JAKS Resources Bhd
's renounceable rights issue of up to 278 million warrants is in the money and there should be no dilution to current shareholders.
It maintained its buy call on the counter with a target price of RM1.90 as the company's fundamentals remain unchanged with no dilution impact to the current shareholders.
The research house said that based on current price indication, the total cost of the new share is RM1.25, comprising 25 sen for the subscription and RM1 for the conversion, which is at a 15% discount to the current share price.
"Given the sharp discount, there is a high likelihood that most of the rights will be
subscribed, in our view," it said.
The warrants will expire five years from the date of issuance and can be converted from the second anniversary date of the issuance.
Jaks will raise RM68.2mil to RM69.5mil from the subscription of the the warrants, with an additional RM278mil raised from the conversion at a later date.
The bulk of th emoney raised from the subscription will go towards the Vietnam power plant project to expedite the current progress of its EPCC project.
"We believe that the allocation of RM10m to renewable energy projects is a good indicator that management is making progress in identifying new projects that will help to replenish the earnings shortfall from the completion of the Vietnam EPCC contract in 2020.
"The funds from the warrants conversion could be used as equity if those new projects does materialise or take up the option to acquire additional stake in the current Vietnam power plant project."
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