Handal Energy Berhad Company’s performance over the last few years can best be described as a complete disaster.  The Company was unable to pay employees on time, delayed payments to the vendors, embarked on new project that were cancelled shortly after announcing them. Their revenues plunged; earnings were replaced by losses. In addition, insiders sold out their stake and discontinued further investment. Subsidiaries were sold. A very gloomy future lay ahead. Bursa Malaysia has a special process for companies in distress: PN17, which stands for Practice Note 17/2005. Criteria for a listed company to become a PN17 company are below:

1.       Shareholders’ fund is equal or less than 25% of the total issued and paid-up capital of the listed company.

2.       Receivers or managers were appointed to take control of at least 50% of the total assets employed.

3.       Winding up of a subsidiary or associate company which makes up at least 50% of the total assets employed of the listed company.

4.       Auditors expressed adverse or disclaimer opinion on the listed company’s latest audited accounts.

5.       Default in payment; the listed company must announce its inability to provide a solvency declaration

6.       Company was suspended or ceased all or a major part of its operations

It is enough for any of the above conditions to be triggered and Handal becomes a new Serba DK on the road to delisting. There are 30 or so companies in that group today. Sapura Energy, Barakah Offshore Petroleum and Scomi Group Berhad are the peers on the list in various stages of the process.

As a PN17 company Handal will have to:

1.       Regularize its condition within 12 months.

2.       Submit a regularization plan.

3.       Implement the plan.

The contents of the regularisation plan need to address the triggering conditions.  Typical exercises performed to regularize the conditions are:

1.       Settlement of debts with creditors

2.       Reduction of capital to cancel accumulated losses

3.       Onboarding of new investors (white knights) via issuance of new shares

4.       Sale of assets

5.       Issuance of free warrants and right shares to retain old investors

6.       Establishing an Employees Share Scheme (ESS)

At this point Handal is NOT classed as a PN17 company. But it appears to be already taking steps that are typical for the regularisation plan.  On September 15^th, 2023 HANDAL ENERGY BERHAD announced through Mercury Securities Sdn Bhd:

(I)                  PROPOSED SHARE CAPITAL REDUCTION;

(II)                PROPOSED PRIVATE PLACEMENT; AND

(III)              PROPOSED BONUS ISSUE OF WARRANTS

It appears that the directors and management already know what awaits minority shareholders of the Company: a lot of pain and suffering. The destination is unknown. It could be delisting and bankruptcy. Or it could be financial recovery. But for the latter, a new management team is needed.

HANDAL ENERGY BERHAD

https://klse.i3investor.com/web/stock/overview/7253

KLSE (MYR): HANDAL (7253)