Here’s a detailed article based on the document, written for retail investors:

Malaysia Smelting Corporation Announces 1-for-1 Bonus Share Issue: What Investors Need to Know

Key Highlights:

• MSC proposes 1-for-1 bonus issue of 420 million new shares
• Total issued shares to double from 420 million to 840 million
• No capitalization of reserves; share capital value remains unchanged
• Theoretical ex-bonus price estimated at RM1.1274 based on recent trading
• Aimed at enhancing liquidity and rewarding shareholders

Malaysia Smelting Corporation Bhd (MSC), a company dual-listed on Bursa Malaysia and Singapore Exchange, has announced a significant corporate action that could impact its share price and trading dynamics. The company plans to undertake a bonus issue of 420 million new ordinary shares on a 1-for-1 basis, effectively doubling its total issued shares from 420 million to 840 million.

Details of the Bonus Issue

The proposed bonus issue will be carried out on the basis of one new bonus share for every one existing MSC share held by shareholders on an entitlement date to be determined later. This move will not involve any capitalization of the company’s reserves, meaning the total value of MSC’s share capital will remain unchanged at RM237.19 million despite the doubling of share count.

Impact on Share Price

Investors should be aware that this corporate action is likely to affect MSC’s share price. Based on the 5-day volume weighted average price (VWAP) of RM2.2548 up to February 21, 2025, the theoretical ex-bonus price is calculated to be RM1.1274. This represents a significant adjustment to the trading price, which could impact short-term trading patterns and liquidity.

Rationale and Benefits

MSC’s board has outlined several reasons for this bonus issue:

1. Enhance trading liquidity by increasing the number of available shares
2. Improve affordability of MSC shares by adjusting the price downward
3. Reward existing shareholders without diluting their percentage ownership
4. Potentially broaden the company’s shareholder base

Financial Implications

While the bonus issue will not directly impact MSC’s financial position, it will affect some key metrics:

• Net Assets (NA) per share will halve from RM1.80 to RM0.90
• Earnings per Share (EPS) will be proportionately diluted due to the increased share count
• Gearing ratio will remain unchanged at 0.44 times

Shareholder Approval and Timeline

The proposed bonus issue requires approval from MSC’s shareholders at the upcoming annual general meeting. Subject to all necessary approvals, the company expects to complete the bonus issue by the third quarter of 2025.

Potential Market Impact

This corporate action could potentially move MSC’s share price and trading volume. Investors should watch for:

• Short-term price volatility as the market adjusts to the new share structure
• Increased trading activity due to improved affordability and liquidity
• Potential changes in dividend yield calculations based on the adjusted share price

Retail investors are advised to carefully consider how this bonus issue may affect their investment strategy and portfolio allocation.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Share prices can be volatile and past performance is not indicative of future results.

View MSC Historical chart here