KUALA LUMPUR (Jan 17): Furniture maker Sern Kou Resources Bhd has proposed a two-for-one share split and a free warrants issue.

The share split will double the group’s issued share capital to 240 million shares and is expected to result in a downward adjustment to the market price of existing shares, Sern Kou said in a filing with Bursa Malaysia today.

Although this is not expected to have any impact on the group’s total market value, it should increase the affordability of Sern Kou’s shares and appeal to a wider pool of shareholders and investors, the group said.

Sern Kou said it plans to issue 120 million free warrants after the share split is completed, with an exercise price of 40 sen each.

This represents a discount of 32.27 sen or 44.65% to the theoretical ex-price after the proposed share split and is expected to incentivise entitled shareholders to exercise the warrants.

Assuming all 120 million warrants are exercised at the fixed price, a total of RM48 million is expected to be raised for the working capital of Sern Kou.

“The proceeds to be utilised for each component of working capital are subject to the operating requirements of the group at the time of utilisation and therefore cannot be determined at this juncture,” the group said.

The exercise is expected to increase the group’s share capital to RM360 million from RM108 million and its net assets per share to 55 sen from 28 sen, but is not expected to change the group’s gearing ratio.

Basic earnings per share are expected to be diluted to as much as 41 sen from RM1.22 currently assuming the full exercise of warrants, said Sern Kou.

The proposal is subject to approval from Bursa Securities as well as Sern Kou’s shareholders.

“Barring any unforeseen circumstances, the board expects the proposals to be completed in the second quarter of 2018,” the group said.

Shares in Sern Kou closed up 12 sen or 7.69% at a record high of RM1.68, giving the group a market capitalisation of RM201.6 million.