This article first appeared in The Edge Malaysia Weekly on November 18, 2019 - November 24, 2019

OVER the last two years, Perak-based poultry company DBE Gurney Resources Bhd has been slowly transformed into a property developer.

Founded by the Ding family, the company charged onto the real estate scene in February last year, three months after Doh Properties Holdings Sdn Bhd surfaced as its major shareholder.

Doh Properties is the vehicle of the Doh brothers — Datuk Doh Jee Chai, Datuk Marcus Doh Tee Leong and Datuk Jimmy Doh Jee Ming — who are the sons of Datuk Doh Neng Chiong, a prominent Sitiawan businessman.

The Doh family, well known among Sitiawan folk, has played a major role in shaping and developing the property sector there.

When they emerged in DBE Gurney, speculation was rife that the Doh brothers were mounting a hostile takeover of the poultry company and that they would oust the Ding family.

DBE Gurney was also rumoured to be looking to hive off its traditional poultry business back to the Ding family as the Dohs intended to transform the listed vehicle into a pure property play.

When contacted by The Edge  February last year, group managing director Datuk Alex Ding Seng Huat dismissed the speculation, saying that his family did not have plans to exit DBE Gurney or to buy back the poultry business.

But as the saying goes, what was meant to happen will happen. Or at the very least, the beginnings are already apparent.

Last month, it was announced that Alex would buy a 51% controlling stake in six wholly-owned subsidiaries of DBE Gurney for a combined RM32.58 million cash.

These business units, namely DBE Poultry Sdn Bhd, DBE Breeding Sdn Bhd, DBE Hatchery Sdn Bhd, DBE Marketing Sdn Bhd, DBE Food Processing Industries Sdn Bhd and DBE Gurney Chicken Sdn Bhd, are essentially the group’s poultry businesses.

Interestingly, Alex has granted a put option to DBE Gurney to sell all or part of the remaining 49% stake in the six companies at a total exercise price of up to RM9.8 million. Likewise, DBE Gurney has also granted a call option to Alex to acquire all or part of the option shares at the exercise price.

In other words, if the put option or call option is fully exercised, DBE Gurney will no longer be involved in the poultry business.

So, what’s next for DBE Gurney?

Easing the burden

Alex acknowledges that DBE Gurney will be focusing more on the property business, which is currently spearheaded by the Doh family.

“I will be buying back the poultry business, and if everything goes well, the listed entity will become a pure property company,” he tells The Edge over the phone.

For perspective, DBE Gurney’s poultry division is still bleeding red ink, whereas its property division is profit-making.

While the poultry business remains the main revenue contributor, it suffered a loss before tax of RM42.57 million in the financial year ended Dec 31, 2018 (FY2018).

In comparison, its property development division reported a profit before tax of RM4.52 million.

At the group level, DBE Gurney registered a net loss of RM27.8 million on revenue of RM108.23 million last year.

“Since our property division is doing well, why don’t we get the listed company to focus more on that?” says Alex.

“Poultry business is quite challenging, so DBE Gurney intends to offload half of its shares [in poultry subsidiaries] back to my family. By doing that, we can ease the burden of the listed entity. We don’t want the poultry business to drag the group’s performance.”

He says DBE Gurney’s poultry business faces challenges such as rising production costs and higher commodity prices. As such, he believes the group should sell it while there is value. “The listed company will still retain a 49% stake in the poultry subsidiaries, but it might be disposed of at a later stage. Eventually, the listed entity will be a pure property firm. Ideally, that’s our plan.”

It is worth noting that the RM32.58 million consideration comprises a disposal consideration of RM10.2 million and settlement of RM22.38 million owing from DBE Poultry to DBE Gurney.

The group is expected to record a pro forma gain of RM457,070, arising from the proposed disposal.

‘All shareholders could benefit’

It is noteworthy that DBE stands for Ding Brothers Enterprise, a company founded by its former chairman Datuk Ding Chong Chow and his brother Ding Choon Yung in 1986.

The emergence of Doh Properties at DBE Gurney has diluted the shareholding of the Ding family, whose members, including Alex — Choon Yung’s son — have since ceased to be substantial shareholders.

Despite ongoing speculation that the Ding family was “ambushed” by the Doh family and a Singaporean fund, Alex insists that the takeover was never hostile.

He also stresses that everything DBE Gurney has done over the past few years was for the benefit of all shareholders, including the minorities. “It is not a hostile takeover at all. We (the Ding and Doh families) are hometown friends. Everything we did, from the issuance of RCNs (redeemable convertible notes) to the diversification into property, and now, the disposal of the poultry business, is the reason why DBE Gurney is in a better position today.”

Alex maintains that “everything will be fine” in the end and DBE Gurney’s results in the coming years will justify what the company is doing now. “We have proved that the property business can actually lift the group’s performance. The way I see it, there’s great potential in the listed company.”

Losing control over company

In April 2015, DBE Gurney proposed the issuance of RCNs to raise up to RM50 million.

It signed a conditional subscription agreement with Advance Opportunities Fund and Advance Capital Partners Pte Ltd to raise the amount in four tranches. The RCNs, which carry an interest rate of 2% per annum, matured last year.

Advance Opportunities Fund is controlled by Tan Choon Wee, former CEO and director of Singapore-based Advance Capital Partners Asset Management (ACPAM), who found himself in the limelight for the wrong reasons after the Monetary Authority of Singapore reprimanded him in April for failing to discharge his duty and function as CEO and director of ACPAM, the sole operating subsidiary of Catalist-listed financial services firm Pine Capital.

Advance Opportunities Fund is no stranger to Malaysia’s corporate scene as it had agreed in principle to subscribe for the RCNs issued by China-based edible oil producer XingHe Holdings Bhd, which is in the midst of raising RM120 million for its diversification into aquaculture.

Moving back to DBE Gurney, it is learnt that Advance Capital Partners had sold a minor portion of the RCNs to the Doh family while a major portion was converted into shares and offloaded on the open market.

Subsequently, Doh Properties emerged as a substantial shareholder of DBE Gurney with an 8.76% stake via the conversion of RCNs in December 2017.

Since then, Doh Properties has been actively raising its stake in DBE Gurney, so much so that it triggered a conditional mandatory general offer (MGO) after its shareholding hit the 33% threshold in September last year.

Although Doh Properties’ offer to acquire DBE Gurney at 3.5 sen per share, or RM62.79 million in total, was deemed “fair and reasonable”, the MGO fell through as it failed to achieve the required level of acceptance.

To date, Doh Properties remains the single largest shareholder of DBE Gurney with a 35.07% stake.

Whatever transpired behind the scenes at DBE Gurney over the past two years, one thing is certain — the Ding family is ready to move on and the Doh family will be running the show from now on.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.