MyEG shareholders concerned surge in gearing upon office acquisition

KUALA LUMPUR: My E.G. Services Bhd (MyEG) is confident of paying out dividends consistently despite shareholders' concerns over an increasing in its borrowings following the acquisition of new office space for RM155.35 million.
The company's gearing ratio is expected to increase from 10% to 72% upon the acquisition, which the board of directors claim will be pared down in the next 10 years, according to a shareholder who attended the company's EGM.
For the financial year ended June 30, 2014, it paid a dividend of 2.5 sen per share.
Despite their concerns however, MyEG received approval for the acquisition of 22 storeys of a 45-storey office tower known as "Iconic Office" at Empire City, Petaling Jaya for RM155.35 million at an EGM held yesterday. It is expected to be completed by December 2015.
MyEG will pay for it through internally generated funds of RM46.6 million as well as external borrowings of RM108.74 million. Its cash and bank balances stood at RM143.21 million as at end-March, 2015.
The board of directors declined to speak to the press after the EGM.
According to the circular, the acquisition will enable the company to centralise its operations and relocate all employees under one roof to improve efficiency and operational productivity.
"Over the past few years, we've experienced growth in our business, operations and staff strength. In line with this and future expansion plans, we require additional premise to house our daily operations," it said.
For nine months ended March 31, 2015, MyEG posted a 34.97% increase in net profit to RM45.17 million compared with RM33.49 million in the previous corresponding period.
Last June, Prime Minister Datuk Seri Najib Abdul Razak told Parliament that MyEG's estimated net profit for 2015 is RM50 million.
The counter closed 8 sen lower to RM2.70 yesterday on some 3.2 million shares done.