Sunday, July 6, 2014

What happens to Keuro's rights?

Some whom have invested into Keuro would definitely be asking what happened to Keuro's rights as the group has announced of the proposal since August 2013 and almost 1 year since, the rights does not seem to be able to get off the ground.

The rights raised from Keuro was supposed to partially fund the West Coast Expressway (WCE) project, a RM5 billion project and with it having little cash in its coffers, how would the WCE kick off?

From some background, we know of the following:

- Keuro does not have the financial background to fund the project as it involves a large amount of loans to be able to kickstart the project;
- IJM is a substantial shareholder and it seems that it is taking the lead. The announcement made on 20 May 2014 seems to tell us that. If we read between the lines of the 3rd paragraph of the announcement, it seems that the portion where it will costs RM2.828 billion, IJM may be required to fund the project (at least for the initial stage until Keuro is able to raise the required funding). Remember that the government is supposed to provide a soft loan of RM2.2 billion with interest rate of 4% capitalised annually. With that, the funding of the projects are taken care of and as a result of this, the raising of funds through the rights may not be needed until later;

Announcement made by Keuro on 20 May 2014
- Furthermore, if we look through the latest balance sheet of Keuro, it has around RM94 million cash, mainly raised through the sale of 10% of Radiant Pillar Sdn Bhd (Bandar Rimbayu township owner) and private placements made late last year, the group may not need the fund for the project as at now. Remember, I was being critical of the sale price of Radiant Pillar, and this is the reason why it probably was sold so cheap - IJM funding the project almost entirely!

Over time, profits and dividends generated from the Bandar Rimbayu project and a better and more sustainable balance sheet may allow it to better negotiate the funding it needs for the WCE project. That being the case, we may not see the rights raised until then as its partners i.e. government loan and IJM would be able to support those projects.

9 comments:

Bn911 said...

Hi Felicity, would u consider accumulate more Keuro at the moment or just will buy once the project stabilized? Thanks.

felicity said...

Probably yes especially when market gets more and more expensive while keuro stays stagnant

Piny Zone said...

I had been holding KEURO share since 2011 and since now the project already announced awarded to KEURO, somehow the price still stagnant and doesn't move anywhere.

Hope it can break it's record high 1.80 soon

felicity said...

Well Piny, Now it seems that the project is actually ongoing and Rimbayu is doing fine as well. I will take it as opportunity to buy more as the projects are really long term. Think of the concession as a 50 year project.

Bn911 said...

Just scare the project cant be completed on time with lot of delay and cost of project might ballooning........

felicity said...

There has always been this fear but Ijm is probably the best in alleviating this fear as the main contractor

Bn911 said...

Hi Felicity, Finally, Kumpulan Europlus Bhd has fixed the renounceable rights issue of 429.74 million new shares at RM1.08 per rights shares. Do u think the rights price is reasonable at RM1.08? Thanks

felicity said...

The price at RM1.08 seems to be enough for the management to complete the project. I believe they are expecting the warrants to be exercised as well.

Bn911 said...

Thanks for your reply. Will u subscribe to the rights? Thanks again.