Sino Gas shares dive on cash call
Shares in gas refilling station operator Sino Gas Group, formerly Millennium Group, slumped 30.76 per cent after it revealed a plan to tap shareholders for $134 million, before expenses, through a rights share issue.
Resuming trading after a week's suspension, the shares fell 1.2 cents to 2.7 cents apiece yesterday, falling closer to the subscription price of two cents per share.
Brokers said the one-for-two rights issue greatly diluted the holdings of retail investors.
Sino Gas said the cash call would allow it to tighten its grip on Global King Group, a loss-making subsidiary operating natural gas refilling stations in the mainland.
Francis Lun Sheung-nim, general manager of Fulbright Securities, said: 'Investors can't figure out the ultimate intention of the company's decision to increase its investment in the loss-making subsidiary.'
Sino Gas, ultimately controlled by state-owned China National Aero-Technology Import and Export Corp, said it would invest $83 million of the proceeds from the issue in Global King and use $45 million as working capital.
Red chip Catic International Holdings, which owns 23.6 per cent of Sino Gas, agreed to subscribe to its portion of the issue.
Catic's stake in the company will remain unchanged upon completion of the issue as its underwriter, Kingsway Financial Services, has promised to sub-underwrite 34.3 per cent of the enlarged issued share capital of Sino Gas.
This will dilute retail shareholders' interest to 21.91 per cent from 65.73 per cent, assuming all Sino Gas warrants are exercised.
The Global King rights issue, accompanied with a convertible note issue at no extra cost, will boost Sino Gas' shareholding in Global King to 90.6 per cent from the current 51 per cent.