FINTEC Global Bhd’s latest private placement exercise to raise approximately RM19.2 mil for the construction of factory building for its glove business can be a double-edged sword.
On one hand, the exercise goes to show that its rubber glove venture is very much alive and kicking but it can also raise eyeballs from the investor fraternity for the wrong reason.
Aside from the diluting effect to its existing share base which may further trigger a decline of its ‘ultra penny stock’ price of 2.5 sen, critiques will likely see the private placement as a ploy “to shuffle assets” – an accusation that is so synonymous to the company – despite Fintec sticking by the book in undertaking the exercise.
In a Bursa Malaysia filing yesterday (Aug 12), Fintec said it is proposing a private placement which involves the issuance of up to 855 million ordinary shares or 20% of the total number of issued shares.
At an illustrative issue price of 2.25 sen per placement share, the proposed private placement would raise RM19.2 mil in proceeds. Of the proceeds, RM18.6 mil will be used for the construction of the glove factory building.
This is due primarily to a construction cost overrun to the tune of RM46.2 mil in view of higher steel prices due to global supply shortage, larger factory built-up area (from 10,000 sq metres to 20,450 sq metres) and a rise in the cost of pilling works for stronger foundation.
To-date, Fintec has incurred RM15.2 mil for the construction of its factory building, funded by proceeds from the previous corporate exercise completed on Dec 28 last year.
“We are making good progress in the construction works of our production facility which is 55% completed currently,” noted the company’s managing director Tan Sik Eek. “We target to commence manufacturing and sales of medical grade nitrile gloves in 1Q 2022.”
In a recent interview with FocusM, Tan has described Fintech as a “much misunderstood stock” although the company is merely sticking to its fundamental purpose as an investment holding company which core business is to identifying and investing in ‘profitable’ businesses.
According to him, Fintec functions like a private equity (PE) fund in sniffing out opportunistic prospects across sectors with its investment decision (size of stake/horizon) evaluated by an investment committee.
Considering that the trading of marketable securities is part of the company’s ordinary course of business, Tan said it is incorrect to suggest that funds or assets of the company are passed around.
“Very often enough, however, the true value of these companies are still hidden and may have yet to set a track record which makes it an unconventional choice for traditionally risk-averse investors – or even frowned upon,” he justified. “This is where Fintec comes in given we have a higher propensity for risk.”
At 9.46am, Fintec was unchanged at 2.5 sen with 680,200 shares traded, thus valuing the company at RM107 mil. – Aug 13, 2021
