KUALA LUMPUR (July 25): Home-grown building material distributor Chin Hin Group Bhd saw its share price hit a fresh record high of RM4.39 on Monday (July 25), after six consecutive trading days of gains.

The counter’s rally came ahead of an upcoming extraordinary general meeting (EGM) on Aug 4 for minority shareholders to vote on the group’s proposed disposal of 19.34% stake in Solarvest Holdings Bhd for RM103.28 million or 80 sen per share to its major shareholder Chiau family, and a one-for-one bonus issue.

Chin Hin’s shares rose as much as 8.1% to an intraday high of RM4.43 on Monday, before paring gains to close 7.1% higher at RM4.39.

The stock climbed 40% from RM3.14 on July 15, giving it a year-to-date gain of a whopping 69%. The counter was also the largest gainer among all Bursa securities on Monday.

When contacted, Chin Hin’s Managing Director Chiau Haw Choon reiterated that the Solarvest transaction would result in interest savings and improve the group’s cash flow position.

“The terms of the agreement will enable Chin Hin to reprice the Solarvest shares based on its prevailing market price on the completion date. If the market price of Solarvest shares at completion date is higher than the current agreed price of 80 sen [apiece], the disposal consideration will be adjusted upwards to reflect the then prevailing market price.,” he told theedgemarkets.com on Monday.

Shares of Solarvest closed one sen or 1.4% lower at 71.5 sen on Monday, valuing it at RM477.30 million. The stock has fallen 42% year-to-date.

Chin Hin had on May 17 this year proposed to divest 19.34% stake or 129.1 million shares in Solarvest to Divine Inventions Sdn Bhd for RM103.28 million or 80 sen per share, resulting in a one-off disposal gain of RM35.68 million.

Divine Inventions owns 36.6% stake in Chin Hin as at end-June this year.

Divine Inventions is wholly-owned by PP Chin Hin Realty Sdn Bhd, which is 55% owned by Datuk Seri Chiau Beng Teik, 30% owned by his son Chiau Haw Choon and 7.5% owned by Beng Teik’s wife Datin Seri Wong Mee Leng. 

Beng Teik’s children Chiau Haw Loon, Shelly Chiau Yee Wern and Chiau Haw Yew own 2.5% each in PP Chin Hin, while less than 0.01% stake is owned by Low Kum Moon.

Solarvest’s largest shareholder, meanwhile, is Atlantic Blue Holdings Sdn Bhd with 25.86% stake, followed by Chin Hin.

Chin Hin intends to utilise the bulk of the disposal proceeds of RM102.72 million for repayment of bank borrowings, while the remaining RM557,000 for estimated expenses for the proposed disposal.

The group said its bank borrowings are expected to reduce to RM688.17 million after the disposal, from RM790.89 million as at end-2021. Chin Hin saw a substantial jump in total bank borrowings last year, up from RM414.03 million as at end-2020, which fell from RM513.75 million as at end-2019.

M&A Securities Sdn Bhd is the adviser and Eco Asia Capital Advisory Sdn Bhd appointed on April 29 as the independent adviser for the proposed disposal of Solarvest.

Eco Asia said the proposed utilisation of proceeds is “reasonable” and is “not detrimental” to the non-interested shareholders of Chin Hin.

The independent adviser also opined that the disposal is “fair and reasonable” and recommended shareholders to vote in favour of the deal at the upcoming EGM.

In its declaration of conflict of interest, Eco Asia said its Managing Director Kelvin Khoo Chee Siang is also the Independent Non-Executive Director of Chin Hin Group Property Bhd, which is 63%-owned by Chin Hin.

“Over the past three years, Eco Asia has been engaged by Chin Hin to conduct financial due diligence and valuation for Chin Hin’s proposed acquisition of various target companies. 

“The total consideration paid/payable to Eco Asia for such engagements amounts to RM220,000 (inclusive of the professional fee for the appointment as independent adviser for the proposed disposal [of Solarvest]) and represents less than 2.5% of Eco Asia’s aggregate gross revenue for the past three years,” the independent adviser said.