Sunday, 30 August 2020

SCIB: Bonus Towards Billion Market Cap


A day after I wrote that SCIB does not have the ability to do bonus issue, the company proposed bonus issue and free warrants.

I thought bonus issue can only be done by capitalization of retained earning of a company, but now it seems like it can still be done without it.

SCIB has no retained earning with only accumulated losses before this. Now it has proposed bonus issue of 3 bonus shares for 1 existing share, with 1 free warrants for every 2 shares held after the bonus issue.

So that means if you have 1 SCIB share now, after the exercise you will have 4 SCIB shares and 2 SCIB warrants.

Its outstanding shares will go up from 122.6mil to 490.5mil shares, and there will be about 245mil warrants which have a tenure of 3 years.

When Datuk Abdul Karim mentioned that SCIB planned to achieve market cap of RM1 billion in 2 years time, its share price must reach above RM8.

We all know that we won't see SCIB's share price at RM8 as there must be some corporate exercises along the way to increase its shares liquidity, either by share split, private placement, bonus issue or right issue.

With outstanding shares of 490mil after this bonus issue, its share price only need to reach RM2.04 to achieve RM1 billion market cap.

Anyway, it has to improve its earning tremendously in order to achieve this target. 

SCIB's latest FY20Q2 financial result is affected by MCO especially its manufacturing segment which suffers RM2.5mil operating loss.

It reported a quarter revenue of RM94.9mil with a PAT of RM5.1mil.

Its Q3 should perform significantly better while Q4 should be even better with newly secured contracts also kicking in.

At the same time, SCIB also announced an interim dividend of 2.3sen to be ex-ed about 2 weeks later on 14 Sep 2020.

Although the dividend is "small", it's a surprise that SCIB pays dividend so early and it's definitely a positive move. I think it might pay dividends quarterly.

To recap, SCIB has a newly installed dividend policy of at least 30% of net profit.

I have to salute Datuk Abdul Karim with his superior ability to secure contracts especially in the Middle East. He must have a strong network over there.

Currently only less than 6% of the contract value comes from Malaysia. I do hope that SCIB can get more local construction and EPCC contracts when local construction sector is expected to pick up after recovering from Covid-19.

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