Shin Hwa World Ltd, a Hong Kong-listed company, recently unveiled a significant development through a new subscription agreement. This agreement aims to raise HK$28.5 million (US$3.6 million) primarily for maintenance purposes at its renowned Korean integrated resort, Jeju Shinhwa World, home to Landing Casino.
Overview of the Subscription Agreement:
Under the agreement, a total of 845,250,000 subscription shares will be issued to Resplendence Investment Development Limited. Notably, Resplendence Investment Development Limited is owned by Zhang Tingting, an individual investor and real estate property owner within Jeju Shinhwa World. Upon completion, Resplendence will hold a 16.67% stake in Shin Hwa World, representing 20% of its current issued share capital.
Impact on Ownership Structure:
This issuance will have a significant impact on the ownership structure of Shin Hwa World. It will reduce the stake of the company’s founder and largest individual shareholder, Yang Zhihui, from 35.06% to 29.21%, while public holdings will decrease from 38.14% to 31.78%.
Utilization of Proceeds:
Shin Hwa World plans to allocate the proceeds strategically. Approximately HK$14 million (US$1.8 million) will be utilized for the upgrade, repair, and maintenance of existing infrastructure within Jeju Shinhwa World. Additionally, HK$10 million (US$1.3 million) will be allocated for interest payments, and HK$4.5 million (US$575,000) will be dedicated to sales, marketing, and advertising expenses.
Rationale Behind Share Issuance:
The decision to issue new shares was carefully considered by Shin Hwa World’s directors. They deemed it a more favorable financing option compared to debt financing due to its avoidance of interest payment obligations, which could negatively impact the company’s gearing ratio.
Financial Performance Outlook:
Shin Hwa World recently issued a profit warning, anticipating losses between HK$450 million and HK$540 million (US$57.5 million and US$69.0 million) for the fiscal year ending on 31 December 2023.
The new subscription agreement marks a significant financial maneuver for Shin Hwa World Ltd. By strategically raising funds and restructuring its ownership, the company aims to bolster its financial position and enhance the infrastructure and promotional activities at Jeju Shinhwa World, positioning itself for future growth despite recent financial challenges.