KUALA LUMPUR (Feb 9): Euro Holdings Bhd has proposed to undertake another round of private placement to raise up to RM30.9 million for its working capital requirements and repayment of bank borrowings.

Last December, it managed to raise RM9.68 million via the issuance of 80 million shares, also for working capital and repayment of bank borrowings.

In the latest proposed fundraising exercise, the office furniture maker will issue up to 264.57 million new shares — representing 30% of its shares in issue — to independent third party investors at an issue price to be determined later, it said in a Bursa Malaysia filing on Thursday (Feb 9).

The placement shares will be priced at a discount of not more than 15% to the five-day volume weighted average price (VWAP) of the shares immediately before the price fixing date due to uncertain market conditions and price movements of the shares.

Of the RM30.9 million gross proceeds raised — based on an indicative issue price of 11.68 sen per share, Euro Holdings intends to utilise RM26.51 million for its working capital requirements, including trade payables in relation to its manufacturing of office furniture and for the property development business for the purchase of raw materials.

Meanwhile, RM4 million is for the repayment of bank borrowings, and this will decrease the group’s gearing ratio to 0.12 times from 0.64 times. The remaining RM390,000 is for the proposed exercise's expenses.

As at end-January this year, the group’s borrowings totalled about RM15.81 million and mainly comprised overdrafts and term loans from banks. It has been using term loans to fund the purchase of its warehouse and factory in Rawang and overdraft facility to fund its working capital requirements.

Euro Holdings has entered into a deed of settlement with its managing director and controlling shareholder Datuk Seri Lim Teck Boon, to pay off RM21.2 million outstanding amount owed by issuing 181.5 million settlement shares at an issue price of 11.68 sen per share.

As at Dec 31, 2022, the group had received financial support amounting to RM16.25 million from Lim — for its working capital — in the form of cash advances commencing from March 2021 until April 2022.

After the proposed debt settlement, the group’s total trade and other payables will be reduced to RM21.44 million from RM26.54 million as at end-January this year, while Lim’s stake will be increased to 60% from 51.75%.

Upon completion of the proposed debt settlement and private placement, Lim’s shareholding in Euro Holdings is expected to reduce to 48.04% from 51.75%.

Euro Holdings — which is involved in the manufacturing and trading of office furniture as well as the property development segment — also announced its plan to diversify into the trading of steel products and related business, which will potentially contribute 25% or more of the group’s net profits.

For the nine-month period ended Sept 30, 2022, it posted a net loss of RM7.29 million on a revenue of RM139.04 million. The diversification, it said, will reduce its reliance on its existing business of office furniture industry.

At market close on Thursday, Euro Holdings’ share price was unchanged at 12.5 sen, giving it a market value of RM110.24 million.