Titijaya’s ICPS to massively dilute share base
Alan Voon 
The Titijaya board is hopeful that the group’s performance for FYE6/18 will be satisfactory through continuous sales and existing project progress recognition

TITIJYA-PA, the new irredeemable convertible cumulative preference shares (ICPS) of Titijaya Land Bhd, made its debut on Bursa Malaysia on Oct 4. Although issued as ICPS, TITIJYA-PA has qualities that very much resembles a typical company warrant with an extra dividend-paying feature.

TITIJYA-PA, which commenced trading at 17 sen, has since risen steadily together with the increase in the mother share’s price. TITIJYA-PA was last traded at 24 sen on Oct 11 with the mother share closing the day at RM1.43.

Titijaya issued a total of 615 million ICPS via a rights issue at an issue price of 16.5 sen based on three ICPS for every two shares held on entitlement date. TITIJYA-PA is a warrant-like instrument that allows its holders to “exercise” the preference share into the mother share by paying up in cash.

Unlike some other convertible preference shares or loan stocks with a straight swap for conversion, TITIJYA-PA allows cash top-up to convert to the mother share. This makes TITIJYA-PA the same as a company warrant with an exercise price of RM1.485.

The conversion price of TITIJYA-PA is RM1.65 with ICPS holders having the option to convert to the mother share by surrendering 10 ICPS for one mother share. As long as TITIJYA-PA stays above 16.5 sen, it is likely that the conversion will be via cash top-up.

TITIJYA-PA is also entitled for dividend ahead of the mother share although no fixed dividend rate was specified.

Titijaya is involved in property development and related business. It can be considered a niche developer which focuses on the development of lucrative landbank pockets in matured areas.

In the financial ended June 30, Titijaya reported a net profit growth despite a slight decline in revenue. Revenue for FYE6/17 was 5% lower at RM380.75 mil compared with RM400.08 mil a year ago while net profit during the period was up 12% to RM76.74 mil from RM68.34 mil previously.

In its financial report, the Titijaya board is hopeful that the group’s performance for FYE6/18 will be satisfactory through the continuous sales and existing project progress recognition based on the group’s on-going and upcoming projects.

Among the new property projects include The Shore@ Kota Kinabalu; 3rdNvenue@ Jalan Ampang; Riveria KL Sentral and Damansara West, Bukit Subang.

Titijaya raised RM101.47 mil from the rights issue of ICPS. It intends to utilise RM70.82 mil for property development projects expenditures while RM30 mil has been earmarked for repayment of bank borrowings.

TITIJYA-PA is now trading at a premium of 20.6% which is not very high. Nevertheless, investors should be mindful of the dilutive impact the ICPS has on the earnings per share of the company.

While a listed company is only allowed to issue up to half of its issued shares on warrants, there are no such restrictions on preference shares.

Shares issued by Titijaya can therefore potentially increase to 1.025 billion from around the current 410 million shares should all ICPS be converted via cash top-up option.

The writer is CEO of Warrants Capital Sdn Bhd

This article first appeared in Focus Malaysia Issue 254.