Hello Bro, This Is TMI Calling

Posted the other day, Hello TMI, What's Up Bro?

Let me highlight that one section again.

So in the second set of news we have TMI saying..

• Dominant fixed-line phone company Telekom Malaysia Bhd (TM),(4863) which posted a 73 per cent fall in 2008 net profit, said it will return RM3.51 billion cash to shareholders after sister company TM International Bhd (TMI) agreed to repay a debt it owes in the next quarter. .........
• "There's no reason for us to keep the excess cash ... By returning cash in excess of its requirement to shareholders (98 sen a share), TM is providing immediate value enhancement,"

What do we have here? First it wants to do a US$1 billion rights issue (this is about rm3.6 billion or so) because bank borrowings too much. It also wants to pay back TM rm3.51 billion because it has excess cash.

How now brown cow?

On today's papers: TMI to sell shares at 57pc discount

• TMI to sell shares at 57pc discount
  
  Published: 2009/03/24
  
  TM International Bhd, Malaysia’s state-controlled mobile-phone operator, offered to sell stock at a 57 per cent discount in a rights issue to raise RM5.25 billion (US$1.4 billion) and help pay off debt.
  
  Shareholders will be able to buy five new TM International shares for every four owned, the company said in a filing to the stock exchange in Kuala Lumpur today. TM International is offering RM4.69 billion new shares at RM1.12 each, less than half the stock’s closing price of RM2.61 yesterday on the Malaysian stock exchange.
  
  TMI, which has assets in Asian countries, including Indonesia and India, is seeking to raise funds to repay RM4 billion of debt to former parent Telekom Malaysia Bhd next month, and refinance about US$2 billion of loans used to invest in a mobile-phone operator in India.
  
  “Times are not good, business is quite tough, so to entice the shareholders, it has to be a big discount,” said Lye Thim Loong, who helps manage about US$500 million including TMI shares at Avenue Invest Bhd in Kuala Lumpur.
  
  Kuala Lumpur-based TMI said on March 11 it planned to offer the rights shares at as much as 40 per cent discount to their ex- rights price, or the price it estimates the stock will trade at after the offer.
  
  Bigger Discount
  
  The discount is “bigger than expected,” said Izz Al-Din Maslan, an analyst at AmSecurities Holdings Bhd in Kuala Lumpur who rates TMI stock “sell.” While the issue could lead to a 45 per cent dilution to the company’s earnings per share in 2009, investors should take up the offer to avoid bigger losses following the drop in the stock price, he said.
  
  TMI follows Malayan Banking Bhd in selling shares to raise funds as the global economic slowdown and the tightening of the credit market have made it increasingly difficult for companies to obtain loans.
  
  Malayan Banking, the country’s biggest lender, is raising RM6 billion selling new shares to existing investors at a 43 per cent discount to shore up its capital after making acquisitions last year.
  
  TMI had tumbled as much as 30 per cent since February 26, when the company announced the rights issue plan. The stock recouped some of the losses in the past three days after analysts said the declines were excessive.
  
  The shares were suspended from trading today for the sale announcement. The company is holding a meeting with shareholders to approve the rights offer. The stock added 11 per cent to RM2.61 yesterday.
  
  Malaysia’s state investment agency Khazanah Nasional Bhd, which owns 45 per cent of the company, has said it is prepared to subscribe to as much as 65 per cent of the rights offer. The country’s Employees Provident Fund, which controls about 20 per cent stake, has also said it will take up its portion in the rights offer, TMI has said. - Bloomberg

How?

TMI does the rights issue because this is what's owed to its parent TM.

How nice of TMI to settle this godzilla sized debt in the midst of a global financial crisis.

And after receiving this money, TM, as promised, would give a bumper dividend to its shareholders.

How bro?

Hard to fault this issue because this was promised earlier and a known fact but if you are a TMI shareholder and you are not aware of this arrangement, it does feel a little awkward because the money that you subscribe these rights issue will be the money used by TM to pay the dividends.

How bro?

Here is a report from KN.

And this is what RHB folks has to say.