SCIB to settle RM11.3m debt with new share issuance

KUCHING: Sarawak Consolidated Industries Bhd (SCIB) will settle its debts of about RM11.3 million with a hardware company via the issuance of nearly 18.5 million new ordinary shares.

Wholly-owned subsidiary SCIB Properties Sdn Bhd owes Goh Hardware & Construction Sdn Bhd about RM11.3 million.

On Nov 30, 2023, SCIB Properties entered into a capitalisation agreement with Goh Hardware to settle the RM11.3 million via the issuance of 18,496,345 new ordinary shares at an issue price of RM0.611 per capitalisation share, SCIB said in a filing with Bursa Malaysia.

Detailing the nature of debt to Goh Hardware, SCIB said SCIB Properties had on Oct 24, 2019 accepted letters of awards via Edaran Kencana Sdn Bhd for two engineering, procurement, construction and commissioning (EPCC) contracts from project owner, Serba Dinamik Development Sdn Bhd.

One of the contracts involved main building works (Phase 1 Package Independent utility facility (IUF) at Kota Tinggi, Johor) with project value of about RM25.25 million while the second contract was for main building works (Phase 1 Package C: maintenance, repair and overhaul (MRO) Kota Tinggi, Johor for RM32.95 million).

The contract period for the two projects was from Nov 8, 2019 to June 7, 2020.

Edaran Kencana is an associate of SCIB wherein SCIB Properties holds 30 per cent equity interest. Edaran Kencana’s principal activities was as a general contractor and builder, engineering consultancy and other related services.

Subsequently on No 4, 2019, SCIB Properties awarded the two projects to Goh Hardware for RM24.1 million and RM31.38 million respectively.

On Nov 22, 2022, SCIB Properties issued notices of termination to Edaran Kencana to mutually terminate the two projects due to slow payment and long outstanding debts owing by the project owner.

Pursuant to the capitalisation agreement, SCIB said the RM11.3 million shall be repaid through capitalisation via issuance of the capitalisation shares within one month from the date the conditions precedent being fulfilled. 

“The board (of directors) is of the view that the settlement of the capitalisation amount via the issuance of capitalisation shares to the creditor is the most appropriate method as it would enable the group to (a) settle the indebtedness without incurring additional debt obligation/interest expenses by the group; (b) strengthen the company’s equity base as well as the net assets and gearing ratio of the company as a result of the increase in the share capital of the company, and (c) preserve its cash for other purpose, such as working capital requirements,” it added.

Meanwhile, SCIB has proposed the establishment and implementation of a long term incentive plan (LTIP) of up to 15 per cent of the company’s total number of issue shares (excluding treasury shares, if any) at any point of time during the duration of the LTIP for the eligible directors and employees of the company and its non-dormant subsidiary(ies).

The proposed LTIP comprises of a share grant plan (proposed SGP) and a share option plan (proposed SOP). 

During financial year ending June 30, 2024 (FY2024), SCIB said the group intends to focus on supporting Sarawak government’s development plans through the supply of building materials; and completing its current on-going EPCC contracts and to secure more EPCC projects. These strategies are aimed to grow the group’s business.

“SCIB group’s range of precast and IBS (industrialised building system) products, quality certifications as well as its production capacity position it favourably to support the building materials requirements for large public infrastructure projects as well as building schools and social amenities projects in Sarawak and the wider Borneo region.

“Thus, SCIB group will focus on continuously enhancing the manufacturing capabilities as this will position it favourably to capture opportunities to be appointed as a supplier of precast concrete and IBS products for large public infrastructure projects as well as building and social amenities projects.”

Currently, SCIB group is involved in seven EPCC contracts in Peninsula Malaysia and Sarawak for infrastructure, schools, social amenities and residential building projects with total contract value of RM353.3 million.

With the upcoming development plans announced by the Sarawak government, SCIB said the group will endeavour to secure more EPCC contracts to grow its order book and diversify its revenue.