Kanger proposes raising RM100m with notes, diversifying into property sector

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KUALA LUMPUR (Jan 2): ACE-market listed Kanger International Bhd has proposed to undertake an issuance of redeemable convertible notes (RCN) programme of up to RM100 million today, together with a proposed diversification into property investment and management.

In a filing with Bursa Malaysia, the China bamboo flooring manufacturer said it has today (Tuesday, Jan 2) entered into a conditional subscription with Advance Opportunities Fund and Advance Capital Partners Pte Ltd for the proposed RCN, which comprises of redeemable convertible commercial papers and/or redeemable convertible medium-term notes.

“The proceeds raised from the proposed RCN will be used to fund the expansion of dealerships, acquisition of land and construction of a commercial building, pursuant to the proposed diversification into property investment and management,” said Leng XingMin, the group’s managing director in a statement.

The proposed 2% RCN — due in 2020 — will involve the issuance in four tranches, with multiple sub-tranches. It will mature five years from the closing date of the first sub-tranche.

The notes are convertible into new Kanger shares of 1 sen each at the conversion terms; and are redeemable at the election of Kanger and/or on the maturity date, in cash.

Of the RM100 million to be raised, RM30 million has been earmarked for the acquisition of land, RM27.4 million for capital expenditure and/or working capital, RM22.5 million for the construction of commercial building, and RM13.5 million for the expansion of dealerships.

Kanger said its proposed diversification is in line with its long-term business strategy to strengthen the group’s recurring income stream, moving forward.

As at Sept 30 last year (2014), its cash balance was RM14.4 million, against borrowings of RM10.15 million.

Kanger also announced that its subsidiary Ganzhou Kanger Industrial Co Ltd has entered into a lease contract with Ganzhou Detong Technology Development Co Ltd, for the lease of a commercial building to be built by Ganzhou Kanger, on a vacant land owned by Ganzhou Kanger.

“In accordance with the lease contract, the commercial building will generate an annual gross rental of approximately RMB5.60 million (RM3.15 million), which is expected to contribute to more than 25% of the group’s net profit for a five year period, effective from the delivery of vacant possession of the commercial building,” it said.

The Ganzhou land is on the West Road of Jinling — the main road to Ganzhou Economic and Technology Development Zone.

Kanger said it will seek shareholders’ approval for the proposed diversification, in a general meeting.

“The proposed diversification will not only reduce the group’s sole reliance on its current core business, it will also optimise utilisation of the portion of the Ganzhou Land which is currently vacant, to offer good prospects for the group in the long term, such as an additional revenue stream,” Leng said.

Leng, who holds 55.17% in Kanger, will see his shareholding in the company fall to 34.39%, upon full conversion of the notes.

Meanwhile, its gearing ratio which stood at 0.38 times as at Dec 31, 2013, will increase to 1.5 times after and upon issuance of the notes, but will be reduced to 0.15 times after and upon full conversion of the notes.

Kanger closed up 0.5 sen or 1.32% at 38.5 sen today, giving it a market capitalisation of RM196.08 million. It was first listed on Dec 23, 2013, with an issue price of 25 sen.