Nestcon Berhad Targets RM27.27 Million In Private Placement To Bolster Growth

Nestcon Berhad (Nestcon) is proposing a private placement of up to 70,820,000 new ordinary shares, representing not more than 10% of the total number of issued shares of the Company. This fundraising aims to strengthen Nestcon’s capital position and allow them to pursue the following goals:

• Repay bank borrowings: RM22 million will be used to partially repay existing bank debts, reducing interest expenses and improving cash flow.
• Increase working capital: RM4.58 million will be allocated for construction projects and engineering, procurement, construction, and commissioning (EPCC) of solar photovoltaic (PV) systems. This will support ongoing operations and secure new projects.
• Defray placement expenses: The remaining amount (around RM685,000) will cover fees associated with the private placement process.

Key details of the private placement:

• Placement size: Up to 70,820,000 new shares (10% of issued shares)
• Indicative issue price: RM0.385 per share (subject to change)
• Expected gross proceeds: Up to RM27.27 million
• Placement of shares: To independent investors to be identified

Benefits of the private placement:

• Strengthens capital position: Provides Nestcon with the necessary funding for growth initiatives.
• Faster and more cost-effective: Compared to rights issuance, a private placement offers quicker access to capital with potentially lower costs.
• Improves financial flexibility: By reducing debt and increasing working capital, Nestcon gains more financial maneuverability.

Rationale for private placement over other options:

• A rights issuance would likely take longer and require additional costs like underwriting arrangements.
• Bank borrowings would incur interest expenses, impacting future cash flow.

Nestcon’s future prospects:

The announcement highlights the positive outlook for the Malaysian construction and renewable energy industries. Nestcon aims to capitalize on these trends by:

• Expanding renewable energy business: By leveraging its construction experience, Nestcon seeks to secure more EPCC projects for solar PV systems.
• Securing construction contracts: The company is actively participating in tenders to build a healthy pipeline of construction projects.