Magni-Tech Industries Berhad - Proposed Share Split and Bonus Issue

Date: 02/08/2019

Source  :  PUBLIC BANK
Stock  :  MAGNI       Price Target  :  6.60      |      Price Call  :  BUY
        Last Price  :  2.44      |      Upside/Downside  :  +4.16 (170.49%)

Magni-Tech Industries (Magni-Tech)’s recently proposed a 1-For-2 subdivision and a 1-For-3 bonus issue with an entitlement date to be determined later. Post-share split and bonus issue, Magni’s enlarged number of issued shares will increase to 433.9m. We are positive as we believe that the share split and bonus issue will enhance the marketability of its shares and thus, making it more appealing to a wider base of public shareholders and improve the trading liquidity. We maintain our Outperform call on Magni Tech with a SOP-based TP of RM6.60.

  • Details. Magni-Tech’s issued share capital stood at RM162.7m, with a total of 162.7m shares. As the board plans to implement both Share Split and Bonus Issue simultaneously, the entitlement date for both proposals will be fixed on a same date. Upon completion of the exercise, the enlarged share capital will be RM216.9m, comprising of 433.9m shares. Both the Subdivided Shares and the Bonus Shares will not be entitled to the 5 sen dividend that was proposed along with Q4 quarterly results as the entitlement date for the dividend will be fixed prior the entitlement date for the Share Split and Bonus Issue.
  • Rationale. This proposal is a form of reward to existing shareholders and to improve the trading liquidity of Magni-Tech shares via an increased number of shares. We believe a larger share base and a more appealing share price are likely to attract higher participation from a wider group of investors.
  • No direct change to fundamentals. The corporate exercises are unlikely to have an impact on Magni-Tech’s fundamentals, though we are positive on the enhanced liquidity and marketability of the shares in the long run. On a per share basis, FY20F EPS will be diluted from 71 sen to 26.6 sen based on the enlarged share base of 433.9m shares. Should the proposed share split and bonus issue goes through, our TP will be adjusted to RM2.48.

Source: PublicInvest Research - 2 Aug 2019

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