KUALA LUMPUR (May 22): Practice Note 17 (PN17) company Pharmaniaga Bhd will announce its regularisation plan to Bursa Malaysia in August, said Defence Minister Datuk Seri Mohamad Hasan.

Mohamad added that the company has appointed a new lineup of executives, and MIDF Amanah Investment Bank Bhd as its principal adviser to draw up the regularisation plan.

“The company now continues its core activities as usual including the manufacturing of generic drugs, as well as logistics and distribution of drugs to clients — especially to all health facilities of the Ministry of Health nationwide,” he added in a written reply to a parliamentary question by Aminolhuda Hassan (PH- Sri Gading) pertaining to Pharmaniaga’s efforts to address its PN17 status.

A hefty RM552.3 million impairment of Covid-19 vaccines dragged Pharmaniaga to a net loss of RM607.32 million for the year ended Dec 31, 2022 (FY2022), from a net profit of RM172.15 million a year earlier. Revenue contracted 27.09% to RM3.51 billion from RM4.82 billion.

Since the beginning of the year, Pharmaniaga’s board has faced an exodus. In January, it announced the resignation of its non-independent and non-executive chairman Datuk Seri Zainal Abidin Mohd Rafique, and independent and non-executive director Datuk Dr Najmil Faiz Mohamed Aris.

Later in February, after the vaccine impairment debacle, former managing director Datuk Zulkarnain Md Eusope was redesignated as CEO — but resigned three weeks into the job in March. Another resignation followed in May with independent non-executive director Datuk Dr Azhar Ahmad's exit.

In their stead, Boustead Holdings Bhd group CEO Izaddeen Daud was redesignated from being a non-independent non-executive director of Pharmaniaga to non-independent non-executive chairman, while Boustead chief reinvention and strategy officer Ahmad Shahredzuan Mohd Shariff was named as the group's new non-independent non-executive director.

Meanwhile, Mohamed Iqbal Abdul Rahman was redesignated as Pharmaniaga’s chief operating officer, and Dr Abdul Razak Ahmad was redesignated as a senior independent non-executive director.

Boustead holds a 51.85% stake in Pharmaniaga. It also controls a 57.42% stake in Boustead Plantations Bhd, 65% in Boustead Heavy Industries Corp Bhd, and 20.93% in Affin Bank Bhd. Boustead's controlling shareholder Armed Forces Fund Board (LTAT) is in the process of privatising the company.

Last week, the privatisation deal's principal adviser UOB Kay Hian Securities (M) Sdn Bhd said LTAT crossed the 90% threshold with a 90.49% stake in Boustead, representing 1.83 billion acceptance shares. LTAT also holds an 8.62% direct equity interest in Pharmaniaga

In a bourse filing, UOB Kay Hian announced the offer became unconditional on May 19, after Bank Negara Malaysia granted approval under the Financial Services Act and Islamic Financial Services Act, consequently enabling LTAT to acquire up to 100% equity interest in Boustead.

More specifically, the central bank’s approval under Section 87(1) of the Financial Services Act and Section 99(1) of the Islamic Financial Services Act allows LTAT to increase its aggregate effective interest in Affin Bank to up to 49.2% — by virtue of acquiring the entire equity interest in Boustead.

Shares in Pharmaniaga closed one sen or 2.78% lower to 35 sen on Monday (May 22), valuing the group at RM458.57 million. Since Feb 27, the counter has declined 20.45%. LTAT holds an 8.62% direct equity interest in Pharmaniaga.

LTAT’s ability to pay dividends not dependent on Boustead, Pharmaniaga

Meanwhile, in response to a question from Datuk Seri Johari Ghani (BN-Titiwangsa) on LTAT's ability to pay dividends to its members in view of Pharmaniaga’s hefty FY2022 net loss, Mohamad said LTAT's ability to pay dividends is not dependent on Boustead, and in turn Pharmaniaga.

“This is because since 2019, Boustead has only paid out dividends to LTAT in the first quarter of 2023,” he said, adding the pension fund has taken this into account and carried out asset rebalancing to ensure sustainable annual dividend returns through other sources including private and quoted equity, fixed income instruments and other investments.

“Accordingly, the decline in value and the PN17 status of Pharmaniaga does not directly impact LTAT’s ability to pay dividends to its members,” he added.

However, Mohamad noted that LTAT’s ability to provide sustainable dividend returns is expected to improve as soon as Boustead’s privatisation and Pharmaniaga’s regularisation plan are implemented.