KUALA LUMPUR (Sept 18): Hengyuan Refining Company Bhd (KL:HENGYUAN) has obtained the green light from shareholders for a rights issue of up to 300 million new shares and 150 million free detachable warrants that could raise up to RM300 million for the group.

Shareholders at the extraordinary general meeting on Thursday voted overwhelmingly in favour of the exercise, with 99.23% of the votes cast in support of the plan, the group said in a statement. The fundraising will primarily be channelled towards purchasing additional crude oil feedstock, while strengthening Hengyuan’s equity base and improving operational efficiency.

Hengyuan’s controlling shareholder, Malaysia Hengyuan International Ltd (MHIL), which holds a 51.02% stake, has previously undertaken to subscribe in full to its entitlement under the rights issue. This guarantees the group a minimum fundraising of RM155 million. 

The rights issue, first announced in July, will be offered on the basis of one rights share for every one existing share held, and one warrant for every two rights shares subscribed. Based on an illustrative issue price of RM1 per rights share, Hengyuan could raise up to RM300 million. If the five-year warrants — with an indicative exercise price of RM1.41 — are fully exercised, an additional RM211.5 million could be raised.

The corporate exercise remains subject to regulatory approval and is targeted for completion by the third quarter of 2025. AmInvestment Bank is the principal adviser.

The fundraising comes as Hengyuan seeks to shore up its balance sheet and stabilise operations after three consecutive years of losses. Net loss after tax stood at RM489 million in the financial year ended Dec 31, 2023 (FY2023) and RM358 million in FY2024, while the group remained in the red in the first half of FY2025 with a net loss of RM353.69 million.

The refinery operator, which supplies Shell refined products in Peninsular Malaysia and also counts Petronas, Petron and Five among its clients, is targeting a return to profitability by 2026. 

Over the past five years, Hengyuan said it has invested more than RM2.2 billion in capital expenditure to expand production capacity and move into higher-value products such as Euro 5 gasoil and sustainable aviation fuel.

Separately, Hengyuan said it has inked a collaboration with Trafigura Pte Ltd that will see the Singapore-based trader provide flexible credit terms and supply arrangements. The deal gives Hengyuan priority access to Trafigura’s global crude portfolio, which the group said will help mitigate exposure to supply disruptions and pricing volatility.

“Our strategic supply and credit arrangement with Trafigura goes beyond favourable credit terms — it’s about supply reliability, financial flexibility, and operational agility,” said Hengyuan chief financial officer Yeo Bee Hwan.

Shares in Hengyuan closed unchanged at RM1.25 on Thursday, with a market capitalisation of RM375 million. Year to date, the counter has fallen over 42%.

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