Mpico rights issue to help settle debt
Malawi Stock Exchange (MSE) listed-Mpico Limited has initiated a rights issue to raise K9 billion to be used towards repayment of the company’s existing debt.
Rights issue is the issuance of rights or shares to a company’s existing shareholders that entitles them to buy additional shares directly from the company in proportion to their existing holdings within a fixed time period.
Mpico managing director Damien Kafoteka, in an interview on the sidelines of an investor engagement event in Blantyre yesterday, said the company has over the past years been burdened by high interest rates.
He said the company is reeling from government rental arrears, reliance on one customer and low rental income from its Gateway Mall, which is yet to operate to full capacity.
Said Kafoteka: “We have liquidity issues as a result of delays in obtaining contractual lease payments of over K4 billion from government. Other than that, there is also significant exposure to government as tenant occupying 51 percent of our property.
“But through the rights issue, we are looking at reducing our interest burden, which will filter through to our shareholders because they will benefit from improved profitability. In the short to medium-term, we are upbeat that we would pay dividends progressively.”
He said plans are underway to develop and refurbish new and existing properties to grow the company.
In the rights issue, Mpico has a total of 1.1 billion shares which it is offering to existing shareholders. The process is at a subscription price of K7.83 per share.
In her remarks, Mpico chairperson Edith Jiya said the property management firm opted for rights issue to improve the overall liquidity, de-risk the business and propel growth opportunities.
“The amount of money that the company is spending in serving debt is money that should have been channeled to grow the company or pay back the investor. We want to ensure that we relieve pressure on our balance sheet, optimise our business at the Gateway Mall and diversify our income stream other than relying on one customer as our long and short-term plans,” she said.
Equity analyst at Stockbrokers Malawi Limited Tonderai Maneswa described the development as a positive move for both the company and shareholders.
He said an analysis on the company focused on the fundamentals such as rental incomes, ability of the company to deliver value to shareholders and if the shares are appreciating came out positive.
“It is pleasing to note that Mpico management is putting on the ground a sound investment, especially in the Gateway Mall and diversification of property portfolio, which will likely push up the company going forward,” he said.
Mpico, which was listed on the MSE in 2007, has Old Mutual Limited as a biggest shareholder owning 57 percent shareholding followed by the public with 33 percent shareholding and Lincoln Investment holding 10 percent. n
