MIDF Research said the exercise will increase the number of QL Resources shares in issue without affecting the market capitalisation.
PETALING JAYA: QL Resources Bhd
’s proposed one-for-two bonus shares will encourage trading liquidity and affordability of the company’s shares on the Main Market of Bursa Malaysia, apart from rewarding shareholders.
QL Resources had proposed to undertake a bonus issue of up to 1.22 billion ordinary shares at one bonus share for every two existing ordinary shares held.
This is in part of QL’s initiative to reward its shareholders.
In a report, MIDF Research noted that as of June 28, 2024, the group has an issued share capital of RM620mil comprising 2.43 billion shares.
The research firm said the exercise will increase the number of QL Resources shares in issue without affecting the market capitalisation, as well as to encourage greater participation by investors and potentially widen the share spread.
At the time of writing, the shares of QL Resources, which farms and manufactures eggs and fish substitutes, were trading at RM6.70, translating to a market cap of RM16.31bil.
The proposed bonus issue is expected to be completed by the third quarter of 2024 and QL Resources share price will be adjusted lower.
“QL Resource’s share price adjusted for the bonus issue must not be less than 50 sen, based on the daily volume weighted average market price (VWAMP) for the three-month period before the application date.
“The theoretical ex-bonus price for the group’s shares is expected to be between RM3.93 and RM4.33, based on the lowest daily VWAMP during the three-month period of RM5.90 and the five-day VWAMP of RM6.50,” said MIDF Research .
With a possibility of a lower share price following the spread of shares, the research firm said this would lead to higher trading volumes for QL Resources, and subsequently enhance the ownership stake of shareholders in the company.
“The bonus shares are also expected to increase shareholder value without disrupting the cash flow.
“We believe this is a positive sign that QL Resources is confident of its prospects, following an expected growth in regional and local poultry demand of plus 30% by 2030,” said the research firm, which maintained its “buy” rating on the stock with an unchanged target price of RM7.25.
This target price is based on a 10-year multi-stage discounted cash flow model with an unchanged growth rate of 3.5% and unchanged weighted average cost of capital of 7%.
“We reiterate our positive stance on QL Resource’s commitment to being the market leader across various business ventures and diversified revenue base in the agriculture industry.
“The bonus shares proposed may be a signal that the group is financially healthy with an optimistic growth prospect, aligning with our forecast trajectory,” added MIDF Research.
