KUALA LUMPUR, May 27 — Sunway Bhd, which today reported a 42.6 per cent drop in first-quarter (Q1) net profit to RM78.29 million, has proposed to a renounceable rights issue to raise up to RM1.11 billion.

The company is planning to issue up to 1.11 billion new irredeemable convertible preference shares (ICPS) in Sunway at RM1 each based on one ICPS for every five Sunway shares held, it said in a filing with Bursa Malaysia today.

Sunway said it targeted to raise RM930.3 million to RM1.11 billion in gross proceeds, of which most — RM600 million to RM732.5 million — would go towards partially repaying the group’s borrowings which stood at about RM10.26 billion as at March 31.

The company said it intended to use RM200 million of the proceeds to partially fund the development of a new hospital, Sunway Medical Centre in Penang, and expansion of its existing hospital in Petaling Jaya.

It will also allocate RM179.2 million to partially fund its existing property development and property investment projects.

Subject to the relevant approvals being obtained, the company expected the proposal to be completed in the fourth quarter of this year.

In a separate stock exchange filing, Sunway attributed the year-on-year decline in net profit for Q1 ended March 31, 2020, to lower contributions from most business segments except property development and quarry segments.

It said revenue also eased to RM971.44 million from RM1.12 billion a year earlier.

Sunway said the Covid-19 pandemic, the Movement Control Order (MCO) and Conditional MCO (CMCO) since March 18 had caused significant disruptions and financial impact to the group, particularly the group’s hospitality and leisure businesses, which were not allowed to operate during these periods.

"Although most of the other businesses of the group have resumed operations during the CMCO, the anticipated business recovery will be challenging and dependent on the overall improvement of the broader economy,” it said.

On prospects, Sunway said the group’s performance was expected to be adversely impacted by the pandemic if it was not brought under control.

"To mitigate the consequences, the group has activated its Business Continuity Plan which incorporated its digital platform to manage the operational disruptions caused by the pandemic and the imposition of the MCO,” it said.

In addition, the group said, it had implemented several cost-saving measures including recruitment freeze, It is continuing to monitor the situation and will take appropriate measures if warranted. — Bernama