Shin Hwa World Ltd, listed on the Hong Kong Stock Exchange, has unveiled a strategic plan to bolster its operations at Jeju Shinhwa World, a premier integrated resort in Korea. This restructuring initiative includes a capital reorganization and a proposed rights issue aimed at raising approximately US$39 million to fortify facilities and staff capabilities.
Capital Reorganization Details
The company’s capital reorganization involves a share consolidation process. Under this plan, every 10 existing shares valued at HK$0.01 each will be consolidated into one share with a par value of HK$0.10. Following this consolidation, a capital reduction will ensue to round down the issued share capital for each shareholder to the nearest whole number, with any surplus from fractional shares added to the company’s accounts. This strategic maneuver is anticipated to generate a surplus of approximately HK$45.6 million (US$5.8 million).
Rights Issue Proposal
Post-capital reorganization, Shin Hwa World plans to undertake a rights issue based on a ratio of two Rights Shares for every one Adjusted Share held on the record date. The objective is to raise up to HK$263.7 million (US$33.7 million) before expenses or HK$258.6 million (US$33.0 million) after expenses. This capital infusion aims to strengthen the company’s financial standing, reduce financial burdens, and provide working capital to meet ongoing obligations without incurring additional interest expenses.
Utilization of Proceeds
The intended allocation of the capital raised from the rights issue is strategic and focused. Approximately HK$100 million (US$12.8 million) will be allocated towards maintenance, renovation, and upgrading of facilities within Jeju Shinhwa World, including critical infrastructure projects like water supply construction. An additional HK$73 million (US$9.3 million) is earmarked for enhancing the Resort and Gaming Business through service improvements, supply chain optimization, human resource development, and intensified sales and marketing activities. A further HK$50 million (US$6.4 million) is allocated for managing interest expenses, while HK$35.6 million (US$4.5 million) will be dedicated to bolstering the company’s general working capital.
Business Context and Future Prospects
Shin Hwa World’s decision to pursue this strategic financial restructuring comes on the heels of challenging market conditions. The company reported a loss of US$67 million in 2023, citing pressure on hotel room pricing and occupancy rates due to intensified competition and changing travel behaviors following the easing of global travel restrictions.
This restructuring initiative underscores the company’s commitment to fortify its position within the competitive hospitality and gaming industry, leveraging strategic investments to enhance operational efficiency and service quality at Jeju Shinhwa World. The infusion of capital through the rights issue is poised to provide the necessary financial impetus to navigate through the prevailing market challenges and fuel future growth prospects.
Shin Hwa World’s capital reorganization and rights issue signify a proactive approach towards strengthening its financial foundation and reinvigorating its flagship integrated resort, Jeju Shinhwa World, positioning it for sustained success in an evolving market landscape.