HKC International Holdings Limited Announces Non-Underwritten Rights Issue: Key Details for Investors

Summary of Key Points

• Rights Issue Proposal: HKC International Holdings Limited (HKC) is proposing a non-underwritten rights issue, offering one (1) Rights Share for every two (2) existing Shares held on the Record Date at a subscription price of HK\$0.28 per Rights Share.
• Record Date: The entitlement will be determined on Monday, 16 February 2026.
• Maximum Proceeds: The company aims to raise up to HK\$21.8 million (gross), with estimated net proceeds of HK\$20.9 million if fully subscribed.
• Non-Underwritten Basis: There is no minimum subscription or amount to be raised. If undersubscribed, the size of the issue will be reduced, potentially diluting shareholders who do not take up their entitlements.
• Irrevocable Undertaking: Mr. Hubert Chan (Chairman & CEO) and Light Emotion Limited (owned by Mr. Chan and his wife) have provided an irrevocable undertaking to accept their full entitlement, amounting to 42,609,514 Rights Shares. Mr. Chan will use part of his Shareholder’s Loan (HK\$3.1 million currently, with an intention to advance HK\$15 million) to set off the subscription monies.
• Discounted Pricing: The subscription price is set at a significant discount of 9.7% to the latest closing price and about 79.1% to the net asset value per share, which is likely to encourage participation.
• Timetable: Key dates include the acceptance deadline (6 March 2026, 4:00 p.m.), the announcement of results (16 March 2026), and listing of fully-paid Rights Shares (18 March 2026).
• Use of Proceeds: Most proceeds (90%) will be used to repay bank borrowings, with the remainder for working capital (staff costs).
• Financial Context: HKC’s cash and bank balances as of 30 September 2025 were only HK\$6.6 million, with bank borrowings due within 12 months amounting to HK\$131.4 million. The group’s gearing ratio is 63% and it posted a loss of HK\$9 million for the six months ended 30 September 2025.
• Shareholding Impact: If fully subscribed, the issued shares will increase from 155,666,407 to 233,499,610. Mr. Chan’s group will keep their 54.7% stake if all shareholders take up their rights, but could rise to 64.5% if only they subscribe.
• Trading Arrangements: Odd lot matching will be facilitated by Lego Securities Limited, and all dealings will be subject to stamp duty and fees.
• Risks: The Rights Issue is contingent on certain conditions (including Stock Exchange approval). If not fulfilled, the issue will not proceed. As the issue is non-underwritten, any undersubscription will reduce total capital raised and could increase dilution.
• Corporate Actions: Recent changes include share consolidation (8-for-1) and increase in authorised share capital to 500 million shares of HK\$0.08 each.

Details Investors Must Know

• Price Sensitive Information:
  • The deep discount (79.1% to NAV) and large potential dilution are likely to be price-moving.
  • Major controlling shareholder Mr. Chan is effectively underwriting more than half the issue via loan set-off, but the rest is open to market risk.
  • If other shareholders do not participate, Mr. Chan’s stake could increase, impacting the control and public float.
  • Use of proceeds is focused on debt repayment, reflecting financial stress and high gearing. Failure to raise sufficient funds could worsen HKC’s financial position.
  • The company expects to apply for listing of both nil-paid and fully-paid Rights Shares. Trading of nil-paid Rights Shares will occur from 24 February to 3 March 2026.
  • There are no non-qualifying shareholders, so all registered shareholders are eligible to participate.
  • The company warns investors to exercise caution and consult advisers before trading, given the conditionality and risks.
• Financial Performance:
  • Revenues have declined sharply (33% drop in six months); the group is loss-making and faces weak demand in both IoT and mobile segments. Property rental income is up, but segment remains loss-making.
  • The company is shifting resources away from mobile and focusing on cost control and new products (AI, robotics) in IoT.
• Shareholder Actions Required:
  • Accept rights via PAL and EAF by the deadline (6 March 2026) to avoid dilution.
  • Can apply for excess Rights Shares; allocation is pro-rata, with strict rules for controlling shareholders to avoid breaching public float requirements.
  • Odd lot matching service available from 24 February to 30 March 2026 via Lego Securities Limited.
  • Share certificates and refunds (if any) expected by 17 March 2026.
• No Recent Fundraising: The company has not conducted any fund-raising involving new securities in the past 12 months.
• Material Contracts: Recent notable contracts include the surrender of a life insurance policy (HK\$6.6 million cash value) and the disposal of a property for HK\$13.2 million, which may affect cash resources.

Potential Share Price Impact

The Rights Issue is a major corporate event for HKC International Holdings Limited, with the following implications for share value:

• The deeply discounted offer and substantial dilution risk are likely to impact the share price negatively if shareholders do not fully participate.
• Financial stress (high gearing, declining revenues, losses) may weigh further on investor sentiment.
• The transparent use of proceeds for debt repayment and working capital may reassure some investors, but the company’s future depends on successful execution and market participation in the Rights Issue.
• Major shareholder’s increased control in the event of low participation could affect market perception and liquidity.

Conclusion

HKC’s non-underwritten rights issue is a critical event that shareholders must evaluate carefully. The combination of financial challenges, discounted pricing, and potential for dilution or increased control by the major shareholder makes this offering highly price-sensitive. Shareholders are strongly encouraged to review their positions, consider accepting their entitlements, and consult professional advisers as appropriate.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should consult their own professional advisers and review the full prospectus and relevant documents before making any investment decisions. The author accepts no liability for any losses arising from reliance on the information contained herein.

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