Published July 30, 2009

Boustead plans to raise up to RM1.3b this year

Group to sell stake in insurance unit, Sumatra plantation; rights issue gets nod

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(KUALA LUMPUR) Malaysia's Boustead Holdings Bhd plans to raise as much as RM1.33 billion (S$543 million) from stock and asset sales this year to repay debt and fund expansion.

The plantations and property group hopes to conclude talks to sell its stake in an insurance unit and 17,000 hectares of plantations on the Indonesian island of Sumatra, raising as much as RM600 million, managing director Lodin Wok Kamaruddin said in Kuala Lumpur yesterday.

'We're talking with several parties who are quite serious' about acquiring the assets, Mr Lodin said. 'We hope to complete' the stake and land sales by the end of the year.

A separate plan to raise RM729.1 million through a rights offer was approved by shareholders yesterday, he added.

Boustead joins Malayan Banking Bhd and Axiata Bhd in raising funds through share sales, capitalising on a rebounding Malaysian stock market that has recovered most of its 39 per cent loss last year.

Paying down debt and reducing the debt ratio would give Boustead a greater flexibility to raise borrowings for future expansion, said James Ratnam, an analyst at TA Securities Holdings Bhd.

The cost of equity has become cheaper than the cost of borrowing after the stock market rebounded, he said.

Boustead shares have risen 4.2 per cent since July 10, when the company first announced the rights offer plan. It closed unchanged at RM4 yesterday.

The company expects to complete the rights offer by the third quarter and will use the proceeds by the end of next year, it told shareholders.

Boustead may use as much as RM400 million from the rights offer to repay debt, lowering its debt-to-equity ratio to 0.7 times, Mr Lodin said.

The move would also cut the company's interest costs by RM24 million annually. Boustead has about RM3.61 billion in bank borrowings, he said.

Up to RM328 million of the proceeds will be used for working capital and asset acquisitions, the company said.

Boustead plans to buy more land for its property division and expand its shipbuilding activities, Mr Lodin said, declining to be specific. It also plans to buy plantation land in the Malaysian eastern states of Sabah and Sarawak on Borneo after selling the one in Sumatra.

The company also hopes to get a new contract to build more offshore patrol vessels, part of a plan to supply 27 vessels to the Malaysian navy, he said. -- Bloomberg