South Malaysia Industries lodges complaint with SC on alleged CMSA breach

• SMI on Feb 17 announced to Bursa Malaysia that Prolexus Bhd — through Honsin and Hi-Q — had emerged as a substantial shareholder with a 10.01% stake. 

KUALA LUMPUR (April 4): South Malaysia Industries Bhd (SMI) has lodged a complaint with the Securities Commission Malaysia (SC), alleging that over 20 parties comprising companies and individuals acting in concert have accumulated more than 33% equity stake without making a mandatory general offer.  

In a statement on Tuesday (April 4), SMI alleged that the group of parties was acting in concert with Honsin Apparel Sdn Bhd and Hi-Q Media (M) Sdn Bhd, which collectively own a 10.01% stake in the loss-making property developer. 

“SMI had provided documentary evidence that the parties had breached Section 218 (2) of the Capital Markets and Services Act 2007 (CMSA), which requires them to make a mandatory general offer to acquire all the shares in SMI not held by them,” the statement read. 

SMI on Feb 17 announced to Bursa Malaysia that Prolexus Bhd — through Honsin and Hi-Q — had emerged as a substantial shareholder with a 10.01% stake. 

SMI said on Tuesday that the parties acting in concert also included YB Ventures Bhd, another listed company, an executive director and a substantial shareholder of both Prolexus and YB Ventures alongside “some close relatives”.

Honsin and Hi-Q on Feb 17 requested SMI to call for an extraordinary general meeting (EGM), and provide a copy of its record of depositors (ROD) as at Feb 20. 

The EGM was meant to remove SMI’s current five-member board, and replace them with two persons nominated by Honsin and Hi-Q, namely Lee Boon Siong and Tan Eik Huang. 

Nearly a week later on Feb 23, Honsin and Hi-Q filed a suit in the Kuala Lumpur High Court to compel SMI to provide the ROD. 

SMI said in the statement on Tuesday that the group had included its findings in the complaint to the SC as supporting evidence, and in its affidavit in reply to the court. 

“We now understand the reason behind the high-handed approach of Honsin and Hi-Q in demanding SMI to provide the ROD in one working day, and filing their suit in the Kuala Lumpur High Court against us.  

“These parties acting in concert are attempting to take over SMI without making a mandatory general offer, which is against the Take-overs and Mergers Code. If they succeed, they will take control of SMI without consideration for the rights of all other SMI shareholders, including minority shareholders,” said SMI on Tuesday. 

For the financial year ended Dec 31, 2022 (FY2022), SMI reported a wider net loss of RM5.03 million, from RM1.72 million for FY2021, as revenue dropped slightly by 2% to RM48.74 million from RM49.81 million. 

As at FY2022, the group had deposits, bank and cash balances worth RM10.85 million, part of its total assets of RM167.41 million. 

More than half of the group’s total assets were investment properties worth RM90.8 million. 

SMI’s total liabilities amounted to RM27.4 million, of which long-term borrowings were RM9.5 million, while short-term borrowings stood at RM6.27 million. 

It is worth noting that SMI’s shareholding structure is rather fragmented as well, with the biggest portion of 9.311% owned by BH Builders Sdn Bhd, a wholly-owned subsidiary of Asian Pac Holdings Bhd, another Main Market-listed property developer.

Asian Pac also has a 2.253% direct interest in SMI, while Mah Sau Cheong owns a 7.65% stake. 

Mah is a major shareholder of Asian Pac, owning 31.98% direct interest and 0.35% through his wife Chin Lai Kuen.