KUALA LUMPUR: Yong Tai Bhd's proposed issuance of new redeemable convertible preference shares (RCPS) will see the company get a much-needed infusion of funds to proceed with its various business ventures.
Public Investment Bank Bhd (PublicInvest) said the issuance will help the company's efforts to improve its operations, which were severely hamstrung by the Covid-19 pandemic.
PublicInvest, however, said the exercise will be "severely dilutive upon full conversion " as earnings generation from Yong Tai's projects are not likely to be significant enough to mitigate the apparent negative effects.
"The rehabilitation of the company's financial standing takes precedence for now," it said.
Hence, PublicInvest is neutral on the proposal and keeps its earnings estimates and valuation on Yong Tai unchanged at this juncture.
The upside may come from more significant headway made in Yong Tai's vaccine-related venture and its recent foray into gold mining, both of which PublicInvest has not accounted for in its estimates.
"Re-opening of the Encore Melaka theatre will provide a further boost to sentiment. While there appears to be a relatively attractive share price upside to our sum-of- parts derived target price of 24 sen, we retain our Neutral call for now given the lack of near-term re-rating catalysts," it added.