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JOYAS International Holdings is expanding into nickel trading, with plans to buy a 70 per cent stake in a Hong Kong outfit for HK$700,000 (S$118,000) in cash.
The metal gifts and jewellery maker will also issue up to S$3.5 million of warrants and up to S$5.3 million of convertible bonds to help fund its diversification plans.
"These new business activities present niche markets which will provide suitable investment opportunities for the group," Joyas managing director Peter Lau Chor Beng said in a statement. "This is because the global demand and consumption of nickel is expected to outpace supply in the long term, fostering a sustainable and long term value proposition in the nickel trading and distribution business."
Joyas plans to buy the majority stake in Hong Kong Silver Basic Group (HK Silver), a distributor and trader of nickel in Hong Kong and China. Existing HK Silver shareholders Wang Jun Zhe, Wang De Wei and Zhao Yan Hui will retain the remaining 30 per cent.
HK Silver posted a net profit of HK$187,000 in fiscal 2013. Joyas did not provide details on its balance sheet.
To help fund the diversification, Joyas plans to offer up to 354.7 million warrants at one Singapore cent apiece, with each warrant carrying the right for five years to subscribe for one new share at 10 Singapore cents per share. The exercise price represents a 150 per cent premium to Joyas's four Singapore cent close on Dec 1. Assuming all the warrants are exercised, Joyas expects net proceeds of S$37.1 million after fees.
Joyas will also offer up to S$5.3 million of four-year convertibles at 1.5 Singapore cents each. The notes will bear a coupon of 7 per cent and an initial conversion price of 10 Singapore cents. Joyas may call the bonds after three years at 103 per cent of the principal amount.
Assuming the bonds are fully converted, the new conversion shares will represent 15 per cent of Joyas's existing share capital.
About 80 per cent of the proceeds from the warrant and convertible issuances will be used for the nickel business, with the remaining 20 per cent for general working capital purposes.
Joyas shares had not been traded as at 3.32pm on Tuesday. They last traded at four Singapore cents on Nov 28.