KUALA LUMPUR (Dec 5): MTouche Technology Bhd has announced a series of proposals, including par value reduction, share consolidation, rights issues with warrants and employees’ share option scheme (ESOS), aimed at providing greater flexibility for the company to raise funds.
In a filing to Bursa Malaysia, the information technology and telecommunication group said its current share price is not conducive to embark on any fundraising or corporate exercise involving the issuance of equity and equity-related securities.
Its proposed par value reduction, it added, will facilitate implementation of the share consolidation and rights issue proposals.
The par value reduction will give rise to a total credit of up to RM12.7 million, assuming none of the existing convertibles have been exercised as at Nov 30, and a total credit of up to RM18.6 million, assuming all the existing convertibles has been exercised.
As for the share consolidation proposal, it involves the consolidation of every two shares into one new share, leading to a reduction in the number of shares available in the market, which would benefit the company with an easier management.
“The proposed share consolidation, together with the proposed par value reduction, will also allow the company to have further flexibility to raise funds at an attractive price,” said MTouche.
The right issue proposal involves the issuance of up to 557.5 million rights shares, together with up to 278.8 million free warrants, to be implemented on a renounceable basis of six rights shares together with three free warrants for every two existing shares held.
The right issues with warrants will only be undertaken after the completion of the par value reduction proposal and share consolidation proposal.
On the utilisation of the gross proceeds from the right issues, MTouche said the minimum scenario would see proceeds of RM6.0 million with more than half spent on the development of a mobile digital ecosystem platform (MDEP), and another RM1.25 million spent on upgrade of existing mobile value added services platform (MVASP).
Under the base scenario, MTouche will be able to raise RM38.2 million, while the maximum scenario would see RM55.8 million raised. The group intends to spend RM12 million on regional business expansion, as well as another RM7.5 million in acquiring new office premises.
MTouche said its board intends to develop an MDEP, as the company is of the view that its current core business, which only offers mobile value added services for the conventional method of services and contents consumption, will slowly be replaced by the adoption of smartphones.
The completion of MDEP is expected to generate revenue from smartphone users, in-app purchases from mobile contents and applications in the MDEP, as well as through provision of marketing, advertising and sales services.
The proposed ESOS is expected to create a more competitive remuneration scheme to attract more skilled and experienced individuals to join the group and contribute to its continued growth and profitability.
“The board, having considered the current and prospective financial position, needs and capacity of the group and after careful deliberation and taking into consideration the rationale and all other aspects of the proposals, is of the opinion that the proposals are in the best interest of the company,” said the group.
The proposals are expected to be completed by the third quarter of 2017, subject to all relevant approvals being obtained.
MTouche continued to remain profitable in the recently-released results for the third quarter ended Sept 30, 2016 (3QFY16). But the profitability has been rather thin, with net profit for the first nine months of the year amounting to only RM821,000.
MTouche’s shares were untraded today. They were last traded at 8 sen each, just above their all-time low of 7 sen reached in November. The group has seen its share price decline by 33.3% over the last one year, and at current level, it has a market capitalisation of RM20.4 million.