KUALA LUMPUR (March 19): The board of directors of South Malaysia Industries Bhd (SMI), who held an emergency meeting on Monday to deliberate on notices received from two of its shareholders - Techbase Industries Bhd's unit and Chong Fu Shen - to appoint new directors to the board, said a substantial shareholder has objected to their intention to make said appointments.

This same substantial shareholder has also lodged a complaint to the Securities Commission, alleging that Fu Shen, Datuk Au Yee Boon, Techbase (formerly Prolexus Bhd) and its wholly-owned Honsin Apparel Sdn Bhd, and YB Ventures Bhd, together with other parties acting in concert, had breached Section 218(2) of the Capital Markets and Services Act 2007.

The section stipulates that those who had obtained control in a company shall make a takeover offer for its remaining voting shares.

"Following an extensive deliberation and discussion, and with the new complaint received, the board has requested further views from the legal counsels, and thus, the meeting has been adjourned at 3.20pm and to be re-convened at 10am tomorrow (Tuesday)," it said in a bourse filing.

While it has not made a final decision on the notices it received, its board "is inclined to circulate the proposed resolutions as set out in the notices of intention as mentioned above to be moved in the upcoming annual general meeting".

Hence, SMI said it has reached out to Fu Shen and Honsin Apparel to check whether they will bear the costs of sending out the notices to its shareholders.

"The company will make the necessary announcements on the development of the matter upon the conclusion of the board meeting which is to be reconvened tomorrow," it added.

It was previously reported that SMI was seeing signs of Techbase making another attempt to take control of SMI's boardroom, as its unit Honsin Apparel expressed its intention last week to appoint Hong Zheng Hong and Tan Eng Gooi as directors in the upcoming AGM. Honsin owns a 7.5% stake in SMI as of Oct 12 last year.

Fu Shen, meanwhile, has expressed his intention to appoint himself, Lum U-Jun, Chong Fu Chih and Loo Choo Hong as directors. Fu Shen has a 0.7% interest in SMI.

Last year, Honsin had sought to remove SMI’s board of directors through an extraordinary general meeting (EGM), which did not materialise as both parties were subsequently embroiled in a series of legal battles.

Honsin had deemed that its rights as shareholders were violated as its request to convene the EGM was allegedly blocked, while SMI filed a complaint to the Securities Commission of Malaysia (SC), alleging that people acting in concert with Honsin had collectively taken control of over 33% of the company's shareholdings without making a mandatory takeover offer.

In December last year, Honsin and Techbase's 51.91%-owned HIQ Media Sdn Bhd also sued SMI and its board of directors for allegedly violating their rights as shareholders after SMI sought for more time to hold its AGM. The suit was filed after the Companies Commission of Malaysia granted SMI till March 31, 2024 to hold its 52nd AGM, following an application from SMI to extend the deadline from Dec 31, 2023.

Meanwhile, SMI announced last Thursday it had filed a judicial review against the SC to compel the SC to give due consideration to and conduct a proper hearing on the group’s complaint dated March 23 last year. It also wants the SC to come up with a decision on the complaint, and to communicate it to the group, with the basis and reason for its decision set out.

In response, SC said on Friday it had already looked into and acted on the complaint it received from SMI, and that it had had multiple engagements and communications with SMI on the issue, with the most recent being in January this year.

SMI's largest shareholder is Asian PAC Holdings Bhd, which owns a direct 2.25% and an indirect 9.3% stake. Mah Sau Cheong, who is Asian PAC’s single-largest shareholder with a 32% stake, also owns a direct 7.65% interest in SMI.

Involved in managing car parks, the manufacturing of assorted wires and property development, SMI has been loss-making since 2019. 

As of its second quarter ended Dec 31, 2023 (2QFY2024), SMI’s deposits, bank and cash balances stood at RM9.76 million, with short-term borrowings of RM8.9 million and long-term borrowings of RM6.48 million.

Notably, the group owns Menara SMI, a 15-storey office tower situated along Lorong P Ramlee here. The group also owns and operates 2,230 car park bays in Kelana Square and 1,227 car park bays in Zenith Corporate park in Kelana Jaya.

According to SMI’s 2QFY2024 balance sheet, it has total assets worth RM154.61 million, 59% or RM90.58 million being investment properties.

SMI shares closed half a sen or 0.8% lower at 63 sen, giving the group a market capitalisation of RM132 million. 

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