DGSB terminates rights issue, looking at capital restructuring

KUALA LUMPUR: Formis Resources Bhd's subsidiary Diversified Gateway Solutions Bhd (DGSB), which aborted plans to raise up to RM33.9 million from a rights issue this year, is considering other options to raise money including capital restructuring.

DGSB CFO Richard Voon explained that the IT based company dropped its rights issue plans since its share price was below par value and hence a capital restructuring makes more sense at the moment.

He, however, refused to divulge further on the upcoming plan.

"It will be a very complex set of initiatives before we are able to get to a point where the shareholders will all jump in to subscribe. Given the context that our share price is below the par value, it's not going to be successful. So we have to look into potentially a capital restructuring," he said, without committing to a timeline for the exercise.

DGSB's par value stands at 10 sen, while over the last two months, its share price has risen from 5.5 sen to 8.5 sen.

Voon added that the company has obtained shareholders' approval of Section 132D of the Companies Act which enables it to issue new shares of up to 10%, that can be activated when needed.

As of March 31, 2014, the company's cash and cash equivalents stood at RM92,716 and total liabilities stood at RM19.54 million.

"We announced earlier this year around April that after the final extension from Bursa Malaysia for three months which expired in April and in view of how the share price was back then of below par value, the board and management decided that we want to be able to have a successful rights issue not just on the basis of minimum subscription.

"As such, with this view, we have decided to terminate the previous additional listing announcement that was approved by Bursa Malaysia so that it will give us the time to look into a more holistic fund raising exercise where we will be able to involve all the shareholders of the company," Voon told reporters after its AGM yesterday.

He said its shareholders today are "more or less happy" with the company's financial performance for the financial year ended March 31, 2014 (FY14), which reflected two consecutive years of positive performance and as such, the group is confident that shareholders will be supportive when it initiates its fund-raising exercise.

According to Voon, its FY14 net profit of RM1.6 million is almost double of what it reported in FY13, due to the initiatives carried out over the last 18 months whereby non-performing businesses were reviewed and shut down.

"Comparatively, our impairment of goodwill has also reduced to a point of RM650,000 compared with the year before which was in excess of RM2.2 million. The auditors of course having scrutinised the basis, are comfortable. Moving forward, barring unforeseen circumstances with the economics of the country, region and global environment, we are hopeful that for 2015, there will be further improvements," he said.

Its chairman Datuk Mah Siew Kwok reiterated and expects the financial year ending March 31, 2015 (FY15) to perform better than FY14, despite a net loss of RM951,000 reported in the first quarter ended June 30, 2014.

"In certain quarters we have incurred some losses. I think we are already turning around but give us a little bit of time, we will show you the performance. Come 2015 we will show better results than 2014," he said, adding that it is currently bidding for some "good contracts".

Mah declined to reveal the number or value of the contracts it is bidding for except to say that the contracts have a healthy enough value to boost the company's performance in FY15.

"We have a very healthy carried forward (business) in our pipeline and there are more to come. In terms of projects, we are now engaging, we are doing more services-oriented projects. Now we are getting ourselves into services business, IT services," said its CEO Richard Lau Chi Chiang.