VibroPower proposes S$1.8m rights cum warrants issue to fund business expansion

WATCH-LISTED VibroPower Corporation is looking to issue up to S$1.8 million of shares with warrants on a renounceable, non-underwritten basis, mainly to finance the expansion of its businesses, it said in a filing late on Tuesday night.

Under the proposed rights cum warrants issue, for every two existing ordinary VibroPower shares held, entitled shareholders will be offered one rights share plus one free detachable and transferable warrant.

The issue price is S$0.10 for each rights share, while the warrants will be issued free.

Each warrant will entitle the holder to subscribe for one new share in VibroPower at an exercise price of S$0.10 apiece within five years of the issue.

Shares of VibroPower last traded at S$0.112 on Aug 26. Compared to that closing price, the proposed issue and exercise price of S$0.10 represents a discount of about 10.71 per cent.

Based on the company's issued share capital of some 36 million shares (excluding 1.1 million treasury shares) as at Oct 1, VibroPower is proposing to issue up to 18 million rights shares with 18 million warrants. The company has no outstanding convertible securities as at Oct 1.

That means the rights issue will raise up to S$1.8 million, excluding any proceeds from the exercise of any warrants. After deducting estimated expenses of about S$260,000, net proceeds will thus be around S$1.54 million.

VibroPower, which manufactures and supplies customisable power generator sets, said the main rationale of the proposed issue is to fund the expansion of its existing businesses, which may include the acquisition of and/or a strategic investment in a similar business in South-east Asia. It intends to use 78 per cent of the net proceeds - or around S$1.2 million - for this purpose.

The remaining 22 per cent of the net proceeds - or some S$340,000 - will be used for general working capital requirements of the group, which includes operating costs. (see amendment note) The group is expecting more cash to be required for its operating activities in view of the recently secured exclusive distribution rights of a range of Lister Petter brand of products, including engines and spare parts.

The proceeds from the issue will also help strengthen the group's financial position by enlarging its working capital base to improve its financial flexibility, VibroPower added.

Two individual shareholders - VibroPower co-founder, chairman and CEO Benedict Chen Onn Meng and his brother Chen Siew Meng - have also provided the following irrevocable undertakings under the proposed issue.

Mr Benedict Chen holds a 22.5 per cent stake in VibroPower. By way of acceptance, he will subscribe for all his pro-rata entitlements of 4 million rights shares with 4 million warrants at a total value of S$404,386. By way of excess application, he will also subscribe for all excess rights shares with warrants that are not taken up by the other entitled shareholders at a value of up to S$1.3 million.

Mr Chen Siew Meng owns a 4.32 per cent stake. By way of acceptance, he will subscribe for all his pro-rata entitlements of 777,100 rights shares with the same number of warrants, at a total value of S$77,710.

The proposed rights cum warrants issue is subject to shareholders' approval at an extraordinary general meeting to be convened in due course.

VibroPower was placed on the SGX's watch list under the minimum trading price entry criteria on June 5, 2017. The mainboard-listed company must meet the exit criteria within 36 months from that date to leave the watch list, failing which SGX will delist the company or suspend trading in its shares with a view to delisting it.

VibroPower on Tuesday advised shareholders and potential investors to exercise caution in trading in its shares, as there is no certainty that the proposed issue will materialise.

Amendment note: An earlier version of this article misstated the dollar figure for the net proceeds to be used for general working capital requirements. The article has been amended to reflected the correct figure of S$340,000.