Thursday, July 12, 2007

Silver Bird Again

Saw the following set of comments made by CIMB on Silve rBird.

  • No greenlight from the SC. The Securities Commission (SC) has rejected Silver Bird Group’s (SBG) proposal for a two-call rights issue with warrants. The SC's decision was based on the second call at RM0.15/share which the company proposed to capitalise from the share premium reserve of RM18m, resulting in an issue of securities that are not backed by assets. The SC rejected the proposal as SBG’s share premium reserve of RM23.4m is exhausted by the group’s accumulated losses of RM46m as at 30 Apr 07. SBG is relooking at the proposal with a view to making changes.

    • More potential earnings dilution. This proposal which would raise RM27m-43m proceeds came less than eight months after completion of another fundraising exercise. In Oct 06, SBG completed the sale-and-leaseback of its Shah Alam premises, which include a factory and an office building, for RM92m. Previous fundraising exercises included: 1) issuance of ICULS and RCULS to finance the RM47m acquisition of Stanson in FY10/04, 2) placement of 19m new shares at RM0.96/share in FY05, and 3) issuance of 105.3m warrants in FY05. These exercises have expanded SBC’s fully enlarged share base to 323.7m vs. a basic share base of 210.6m. The proposal rights issue with warrants would expand the fully diluted share base further to 493.7m (Figure 2).

    • SELL reiterated. We maintain our forecasts and target price of RM0.17, pegged to an unchanged forward P/E of 8x and based on the current fully diluted share base of 323.7m. SBG remains a SELL. For exposure to F&B, we recommend Dutch Lady (DLM MK, Buy), which is both a growth and dividend play.

Past postings on Silver Bird: