Eastland Equity proposes 20% share issuance, MD to take up half that

KUALA LUMPUR (April 24): Eastland Equity Bhd has proposed to issue up to 49.13 million or 20% of its total number of issued ordinary shares, about half of which will be taken up by its managing director Lee Chee Kiang, potentially making him the group’s single, largest shareholder.

“The remaining subscription shares will be issued to third party investors to be identified later,” Eastland, which is involved in hospitality and property development, said in a stock exchange announcement today.

At an indicative issue price of 11.21 sen, the group expects to raise up to RM5.51 million from the issuance, Eastland said.

Of the proceeds, RM3.09 million will be used to repay bank borrowings and another RM2.17 million will be used as general working capital. The rest is to defray estimated expenses related to the proposed issuance, Eastland said.

The group, which has been loss-making for the past three financial years, is undertaking the proposed issuance as an interim measure to address its immediate cash flow requirements, it said.

“The management of the company will continuously evaluate corporate exercises to be undertaken with the intention that the financial performance of the group will be improved in the longer term,” Eastland added.

Eastland has entered into a conditional share subscription agreement with its managing director Lee to take up a total of 25 million shares, representing 10.18% of its current issued shares.

Following the proposed issuance, Lee will hold an approximate 8.56% stake in the group versus 0.1% now, it said. The group's single largest shareholder now, based on its Annual Report 2017, is executive director Tan Chin Hong, with a 7.46% stake held as at April 16, 2018.

“Since (his) appointment as the CEO of the company, Lee has advanced cumulatively RM10.48 million to the group to fund its working capital. The proposed share subscription provides an opportunity to Lee to further participate in the equity of the company, which is expected to align his interests with the long-term objectives and business strategies of the group,” Eastland said.

Subject to approval from regulators and its shareholders, the group expects to complete the proposed issuance in the second quarter of this year.

The group’s shares traded unchanged at 11 sen today, leaving it with a market capitalisation of RM27.02 million, after 265,100 shares were traded.