SINGAPORE - In a move which could significantly boost its market liquidity, mainboard-listed air logistics company A-Sonic Aerospace is issuing 14.6 million free warrants to its shareholders.
Under the proposed "one bonus warrant for four shares" deal, every 1,000 A-Sonic shares held will entitle the shareholder to 250 warrants. Shareholders can convert their bonus warrants into shares on a one-for-one basis at an exercise price of eight cents.
Given that A-Sonic shares closed at 66.5 cents on Tuesday (May 25), this means that warrant holders who convert will be getting their A-Sonic shares at a whopping discount of 88 per cent to Tuesday's closing market price.
Chief executive Janet Tan said the generous deal was essentially to reward investors: "Our loyal shareholders have been with us through this long journey and we felt it was time we showed them some appreciation. Of course, if all the warrants are exercised, as I expect they might be, our total liquidity and share base will also increase."
The exercise of the warrant could also lift the market capitalisation and volume weighted average price of A-Sonic shares to a level where the firm would qualify to get off the Singapore Exchange (SGX) watch list, where it has been since June 2017.
The company - which operates in 29 cities in 16 countries - was put on the watch list when its market capitalisation fell below the $40 million threshold. But over the past year, its shares have risen sharply, buoyed by an improved financial performance.
The company posted a profit after tax of US$6.3 million (S$8.3 million) in the 2020 financial year compared with US$2.5 million in 2019. This raised its earnings per share to 14.9 cents compared with 5.9 cents in 2019.
SGX has recently granted a one-year extension on the company's watch list tenure to June next year.
If all 14.6 million warrants are converted to shares at eight cents a piece, the company would get gross proceeds of $1.17 million.
Meanwhile, the share base of A-Sonic would increase by 25 per cent to 73.1 million, from 58.5 million now.
A-Sonic has a net tangible asset base of $48 million, giving its stock a net asset value of 82 cents - which means that at Tuesday's closing price of 66.5 cents, the stock is trading at 19 per cent discount to value.
Also, its stock is backed by net cash per share of 65 cents.
The shares trade at a price-earnings multiple of 4.3 times, a sharp discount to industry peers, which trade at 20 times earnings.
The company had a market capitalisation of $39 million as at the close of markets on Tuesday - just a whisker short of the threshold to potentially make it out of the watch list.
Little wonder that some analysts reckon the stock is trading at a deep discount to its value. Many market watchers also expect A-Sonic to surge this week on news of the bonus warrant issue.
The proposed warrant issue and subsequent listing of both warrants and shares is subject to SGX approval.