This article first appeared in The Edge Malaysia Weekly on August 14, 2017 - August 20, 2017

JUDGING by its earnings performance, Menang Corp Bhd is doing well, although its borrowings are high. The property developer-cum-construction company has been profitable in its past five financial years ended June 30 when some of its peers have slipped into the red.

But this is just one side of the company. According to industry sources, Menang is facing a slew of issues.

It is understood that an ongoing investigation into the company’s wholly owned property development unit, Menang Development (M) Sdn Bhd (MDSB), has led to charges against its former managing director and CEO Datuk Eddie Shun Leong Kwong.

Sources say Shun is alleged to have sold some pieces of land belonging to Menang and even acquired some of them for himself. However, these transactions have not been disclosed on the company’s books. A check with the police confirms that charges have been made against Shun but the investigating officer remained tight-lipped.

At press time, Menang had yet to make any announcements on the investigation or the charges.

Shun is abrupt when contacted for comments for this article. “I don’t want to comment. I am seeking legal advice on this matter, so don’t write anything about this,” he says over the phone.

One source familiar with matters at Menang says it is in “a real mess”. Among other things, the company had not made any announcements to Bursa Malaysia regarding the land sale, sought any independent adviser’s opinion, sent out circulars to the shareholders or sought their approval to sell the land.

According to the source, several transactions, some dating back to 2004, had been concluded but none had been disclosed to the stock exchange.

The 78-year-old Shun had retired from Menang last November after having been its managing director since 1989.

His son-in-law Raja Shahruddin Rashid is the company’s deputy managing director while his son Dr Christopher Shun Kong Leng is a non-executive director. His daughter Marianna Aly Shun was appointed an executive director at the same time he stepped down.

Shun, Menang chairman Datuk Abdul Mokhtar Ahmad and deputy chairman Datin Mariam Eusoff collectively control 11.29% of the company through Maymerge (M) Sdn Bhd and Titian Hartanah (M) Sdn Bhd.

Mariam holds a direct stake of 8.61% in Menang while Christopher has 10.02% direct equity interest.

A check on the Companies Commission of Malaysia website reveals that Titian Hartanah is 97.65%-controlled by Maymerge while Longgain Sdn Bhd owns the remaining 2.35%.

Longgain is equally controlled by Mariam and Abdul Mokhtar. Maymerge, meanwhile, is owned by Shun (45%), Mariam (35%) and Abdul Mokhtar (20%).

A Toh May Fook owns 12.5% equity interest in Menang. Interestingly, Toh was appointed executive director of the company on April 22 last year and re-designated deputy managing director four days later. Three months down the road, he was re-designated non-independent non-executive director. He retired last November as well.

When Toh was removed as deputy managing director, Menang had reported that his departure was a “termination of duties and responsibilities as deputy managing director/deputy chief executive officer”.

Then on Aug 26 last year, Menang set up an investigative committee to review Toh’s conduct as director.

When asked by Bursa on Aug 30 to justify the establishment of the investigative committee, Menang explained that Toh had appointed a financial consultant to look into land transactions going as far back as 2005.

“The said appointment was done without knowledge or approval of the group managing director and the board directors of the company and Menang Development (M) Sdn Bhd (MDSB), a wholly-owned subsidiary of the company, although the letter of appointment was made on behalf of the board of MDSB,” Menang stated in its announcement to Bursa.

“Since the appointment, the financial consultant had liaised directly with Toh. Despite repeated requests from the company and through the company’s solicitors to the financial consultant seeking clarification on the appointment, it has been unable to obtain any clarification, reports and or findings from the financial consultant.”

This “matter of extreme and grave concern that Toh has inappropriately and without approval of the board appointed a third party to conduct an investigation into internal matters” resulted in his suspension.

It is worth noting that Menang has an errata in its FY2016 annual report. In an announcement on the amendment, Menang notes that a 5.36-acre parcel in Seremban should be omitted from the company’s list of properties. The land, which was last revalued in 1999, is valued at RM10.73 million.

Menang’s land bank is located mainly in Klang, Seremban and Port Dickson. As at March 31, its net assets per share stood at RM1.096.

Meanwhile, Menang has a debt-laden balance sheet. It had long-term debts of RM599.28 million as at March 31 and short-term borrowings of RM80.8 million. Its cash balance stood at RM37.88 million.

For its first nine months ended March 31, 2017, Menang recorded a net profit of RM9.7 million on revenue of RM82.47 million.

The counter closed at 84 sen last Friday, giving the company a market capitalisation of RM223 million.

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