KUALA LUMPUR (May 5): Favelle Favco Bhd has declared a highest-ever dividend of 85 sen for its financial year ending Dec 31, 2022 (FY22).

Its largest shareholder Muhibbah Engineering (M) Bhd, which holds a 60.99% stake, is expected to have a tax-exempt windfall of around RM120 million, further bolstering the latter’s financial health on top of a recently concluded RM120 million rights issue.

In a bourse filing on Thursday (May 5), Favelle Favco said the 85 sen dividend will be paid out on June 10, with an ex-date of May 25.

The first interim dividend came before the release of the company’s quarterly financial performance for the first quarter ended March 31, 2022, which is due this month.

Notably, the crane manufacturer has an unblemished streak of rewarding shareholders with regular dividends since its listing in 2006.

A back of the envelope calculation shows that the 85 sen dividend would cost Favelle Favco approximately RM196.24 million based on its issued share capital of 230.87 million shares. The latest interim dividend is almost 11 times more than the total dividend of eight sen declared in FY20.

The bumper dividend of RM196.24 million in total is equivalent to almost 75% of its cash balance of RM264.08 million as at Dec 31, 2021, according to FY21 annual report.

In FY21, Favelle Favco posted a net profit of RM48.12 million, up 8% from RM44.5 million in FY20. Its revenue grew 10% to RM610.2 million in FY21 from RM554.45 million the year before.

Based on the balance sheet as at end-2021, the company was in a net cash position with total borrowings of RM51.22 million versus cash balance of RM264.08 million.

Bloomberg data also showed that the group has sufficient short term liquidity measured in current ratio and quick ratio stood at 1.7 times and 0.7 times, respectively, while its long-term solvency measured in total debt against equity stood at 6.4%.

Meanwhile, Favelle Favco’s largest shareholder Muhibbah Engineering had been loss making for two consecutive years. The group booked net losses of RM3.42 million in FY21 and RM123 million in FY20, against revenue of RM1 billion in FY21 and RM1.2 billion in FY20 amid pandemic-related impacts.

In terms of its financial strength, its cash balance was at RM441.59 million as at Dec 31, 2021 compared to total loans and borrowings of RM525.26 million, including short-term loans of RM407.54 million and long-term borrowings of RM117.67 million.

Given the fresh capital raised from the rights issue plus the expected bumper dividend, Muhibbah Engineering’s cash pile is likely to balloon to RM681.59 million.

Muhibbah Engineering announced a proposed renounceable one-for-two rights issue of up to 256 million shares to raise around RM120 million. The corporate exercise concluded in April with a subscription rate of 130% and gross proceeds of RM120 million, according to its FY21 annual report.

The rationale of the cash call, Muhibbah Engineering said, was to enable the group to partially repay around RM96.69 million of its revolving credit facilities and part-finance RM30.87 million for its general working capital which includes payment of staff salaries, allowances, other emoluments and staff-related expenses.

On Thursday, Favelle’s shares closed unchanged at RM2.58 after 95,500 shares changed hands, valuing the group at RM598.2 million while Muhibbah Engineering’s shares, on the other hand, settled 1.5 sen or 2.9% higher at 52.5 sen, with 8.77 million shares traded, valuing it at RM381.6 million.

Favelle Favco shares have gained 18 sen or 7.5% year to date, valuing the group at RM598.2 million, while Muhibbah Engineering shares have declined by 30 sen or 36% in that period, giving it a market capitalisation of RM381.6 million.