Sapura Energy tumbles 37.8% to all-time low on RM4b rights issue plan

PETALING JAYA: Sapura Energy Bhd has proposed a rights issue exercise to raise up to RM4.0 billion as part of a broader strategic plan to strengthen the group's core businesses, boost its financial position and create better value for its shareholders.
However, the market reacted negatively to the huge amount of fund raising exercise, sending its shares down by as much as 37.8% to an all-time low of 37 sen. At 3pm, the stock was trading at 43.5 sen, down 16 sen or 26.9% on 394.65 million shares done.
In a filing with the stock exchange, the group said it is evaluating various options, which may involve the listing of its exploration and production (E&P) business and exploring a possible strategic partnership for its drilling business.
Up to RM3 billion will be raised through the rights issue exercise with free warrants and up to RM1 billion through the rights issue of Islamic redeemable convertible preference shares.
The proposed rights issue of shares with warrants entails the issuance of up to 9.99 billion rights shares at an issue price of 30 sen per rights share together with up to 998.69 million free warrants, on the basis of five rights shares for every three Sapura Energy shares held and one free warrant for every 10 rights shares subscribed.
The group is seeking participation for the exercise from all substantial shareholders and has since secured letters of support from Sapura Technology Sdn Bhd and Permodalan Nasional Bhd (PNB).
Sapura Technology, a direct shareholder which holds 16%, has expressed its intent to participate in the rights issue for a minimum amount of RM300 million. PNB has indicated its support for the exercise by committing to subscribe to its entitlement and is looking at the prospect of taking up excess shares up to an agreed amount to be determined later.
Sapura Energy president and group CEO Tan Sri Shahril Shamsuddin said the rights issue will enable it to strengthen its balance sheet and continue with its growth momentum, which includes bidding for and executing higher value projects globally.
The group is actively venturing into a larger addressable market in key regions including the Middle East, Africa, Latin America, Caspian and Mediterranean as well as Southeast Asia and Australia.
To-date, it has secured contract wins of RM4.5 billion. The group's order book has increased to RM16.7 billion with contract wins across Mexico, Brazil, India, Australia and Malaysia, since the start of the financial year.
The proposed rights issue is subject to shareholders' approval at an EGM to be convened later.