Issuing new RCPS-i
Raises fund to redeem existing RCPS-i B
We are mildly positive on the proposed RCPS-i C, which rides on the
current low interest rate environment and provides a cheaper funding cost
of 5.43% dividend rate as compared to the existing RCPS-i B’s 5.93%. We
maintain our earnings forecasts pending further information on RCPS-i C.
Reiterate BUY on SPSB with an unchanged MYR1.42 TP (0.4x FY22 PBV).
Proposed new RCPS-i C
SPSB has proposed to undertake a renounceable rights issue of new class
C Islamic redeemable convertible preference shares (RCPS-i C) to raise
between MYR850m to MYR1.18b in gross proceeds. The proceeds will be
mainly used to redeem all RCPS-i B (at 5.93% dividend rate; with +1% p.a.
step-up features from the 6th year; conversion price: MYR3.70; issued in
Dec 2017) amounting to MYR1.04b. The issue price, conversion ratio and
entitlement basis have not been fixed at this juncture but the new RCPS
will carry a preferential dividend rate of 5.43% p.a.
More details on the RCPS-i C
1) An additional step-up preferential dividend rate of 1% p.a. above the
preferential divided rate (5.43%) shall be payable on RCPS-I C on an annual
basis after the 5
th anniversary of the issue date; 2) SPSB can redeem the
outstanding RCPS-i C on or after the 5th anniversary of the issue date; and
3) If the gross proceeds to be raised are insufficient to fully redeem the
outstanding RCPS-i B, SPSB will cover the remaining balance required to
fully redeem the RCPS-i B with its internal funds.
Maintain earnings forecasts
We are mildly positive on the proposed RCPS-i C given its lower dividend
rate vs. RCPS-i B. We maintain our earnings forecasts for now pending
further information on the proposed RCPS-i C (i.e. number of RCPS, issue
price). The proposals are slated to be completed by 4Q22. As at end-Dec
2021, SPSB’s net gearing was 0.6x (industry average: 0.33x).