The gain in the stock price follows hot on the heels of a 9.6% jump yesterday for the stock to close at 28.5 cents.
Sumitomo is paying a premium for the new shares, unlike many fund managers and other investors who routinely ask for a discount to the market price when they want to buy a block of shares from companies or major shareholders.
Sumitomo Rubber Industries will pay S$0.35 for per share or a premium of 27.3% from the volume weighted average price of S$0.275 for trades done on the SGX-ST on 21 Sept.
The net proceeds from the placement after deducting expenses of S$0.1 million, is S$1.4 million.
The net proceeds will be used for Stamford Tyres' working capital purposes to fund its Falken tyre distribution business in South Africa, where sales began in Oct 2009.
“We hope to see sales of Falken tyres in South Africa double or triple within the next three years,” said Mr Wee Kok Wah, President of Stamford Tyres.
For FY 2010 ended April this year, Stamford Tyre grew its South African revenue by 28.6% to S$29.0 million, amounting to 9.4% of Stamford Tyres' topline.
The Group had about 500 points of sales through third-party retailers as well as 4 sales offices-cum-warehouses in South Africa.
Aside from Falken, Stamford Tyres distributes a number of internantional brands, such as Dunlop and Continental, in 8 countries in Asia Pacific, Africa, Australia and India.
Sumitomo Rubber Industries is not just another investor in Stamford Tyres – which helps explain why it is paying a premium for the shares.
Sumitomo, the second largest tyre maker in Japan with approximately JPY 524.5 billion in revenues in 2009, has been supplying Falken tyres to Stamford Tyres since 1975.
Sumitomo Rubber Industries is listed on the Tokyo Stock Exchange and Osaka Securities Exchange.
It has a market capitalisation of approximately JPY 223.59 billion as of 17 Sept and net assets of approximately JPY 184.43 billion as at 30 June.
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