Posted on 06 May 2015
Steelmaker Perwaja Holdings Bhd's shares soared 50 per cent or 8.5 sen to 25.5 sen yesterday after it formalised the agreement with China's Zhiyuan Investment Group Co Ltd to revive its Kemaman Plant in Terengganu.
A person with knowledge of the matter said Zhiyuan could be taking a portion of the PN17 company's private placement and also underwrite the rights issue.
Another industry observer pointed out that the entry of the Chinese partner might be positive for the company, although the industry was still not out of the woods yet.
Steel billet prices have fallen about US$100 (S$133) per tonne year-on-year to US$300 based on prices quoted at the London Metal Exchange.
Zhiyuan is a diversified group with businesses in minerals, chemicals, alloys, new materials, construction material, real estate, logistics and international trading. Perwaja's collaboration is with Zhiyuan's alloy-manufacturing unit TianJin Zhi Yuan Investment Group Co Ltd.
Recall that Perwaja had announced at end-February that it was working towards finalising a debt-restructuring plan to address its accumulated losses, which amounted to RM1.9bil (S$704.8 million) as at second quarter ended Dec 31, 2014.
The company had applied for an extension of up to July 30 for the submission of its regularisation plan to Bursa Malaysia.
Operations at the Kemaman plant had halted since August 2013 and the restarting of the operations there would bode well for Perwaja.
It had first signed a memorandum of agreement (MoA) with Zhiyuan to explore Zhiyuan's participation in Perwaja.
Zhiyuan was given two months to complete the due diligence and the two parties will launch an official signing ceremony on Friday.
After the first MoA, the parties signed the second MoA last Thursday to formalise the agreement. Under the second MoA, Perwaja will lease a portion of land in the Kemaman plant to Zhiyuan.
It also said the definitive agreement between Perwaja and Zhiyuan in relation to the Proposed Regularisation Scheme should be executed by end-July.
To kickstart the revamping efforts, Zhiyuan should invest not less than RM100mil for the first phase of the investment. Of the RM100mil, RM30mil would be in the form of lease depository for the leasing of Perwaja's land.
Zhiyuan would invest in new machinery, as well as modify Perwaja's existing ones. Eventually, Perwaja would be repositioned to produce stainless steel.
Separately, Kinsteel Bhd, which has 31 per cent in Perwaja, also gained traction, adding four sen or 26 per cent to 19.5 sen. Both Perwaja and Kinsteel were among the most actively traded stocks, with 47 million and 54 million shares being transacted.
