GMG

GMG: Announced plans for a renounceable rights issue to raise Gross Proceeds of $349.1m.
Co. has plans to issue 3.8b new shares at an issue price of $0.091, on the basis of 1:1 rights issue. To show its support for the rights Issue, Sinochem (the controlling shareholder of GMG) will subscribe to 60% of the rights issue to show its support for the fund raising.

Abt 80% of the proceeds raised will be used to enhance Grp’s financial capacity and flexibility in pursuing strategic growth and acquisition opportunities, while the remaining 20% will be used for working capital purposes. We note that theoretical ex rights price of the share is at $0.163 and the rights offer represents at 61.3% discount to the closing price of $0.235 as of 25th Oct 2011.

Recall Mon, GMG announced good set of 3Q11 results which was above estimates. Rev at $110.4m, +183% yoy and +8.3% qoq, while Net Profit at $24.4m, +49.3% yoy and +8.3% qoq. Gross Margins improved significantly at 15.3% vs 11.1% qoq, signifying good progress after the acquisition of Teck Bee Heng which increased grp’s processing facilities significantly. Strong rev was attributed to higher ASP and Tonnage Vol. At current price, valuations are compelling, with grp trading at an annualised 11.2x FY11E P/E while balance sheet remains strong with grp in a net cash position.