Dijaya Corporation Rights-Formula for Failure

Get Ready to Lose

I think the Board got it all wrong. I mean all 100% wrong.

Buying almost all of the Chairman's  personal land bank for one, is " not very nice-lah"

Secondly, I think the valuation would not have possibly favoured the minority shareholders.

Thirdly, timing is real-real wrong especially when your share price is lower than the rights pricing.

The bonus issue is just too scrawny to be an attractive sweetener.

Let us look at a typical case of a shareholder with 1000 shares in Dijaya.

So, he applies for what is his due.  His entitlement: 4 new shares for every 5 held.  So, he gets 800 new rights at RM1.20 x 800 = RM960.00

He also gets 1 bonus share for every 4 rights subscribed. For 800 shares,  he gets 160 bonus shares.

Now let us calculate whether he gains or not from participating in this cash raising exercise.

As the share price is now currently at RM1.11, he loses 9 sen x 800 = RM72.00.

Let us attribute a price for the bonus issue. As it is priced at only 20% of current price, let us generously give it a fair vale of 22 sen. So the shareholder will make RM35.20.

Now let us add the overheads for subscription. The government stamp duty costs RM10 while the bank-draft charge at RM5.

The losses is RM72.00 and the overheads is RM15.00. Now let us add in the bonus gains of  RM35.20.

The losses and overheads will come to RM87.00. Deducting the gains from the bonus issue, the shareholder will lose RM51.80.

Auto-loss

 Now, a person in his right mind  will never subscribe for this rights and bonus exercise.

The only gainer is likely Danny Tan.