This article first appeared in The Edge Malaysia Weekly, on November 23 - 29, 2015.

Recent ownership changes at Sycal Ventures Bhd, as new substantial shareholders bought the shares cheap, have drawn attention to the little-known company.

Since early October, Sycal (fundamental: 1.50; valuation: 2.10) has seen a total of 80.1 million shares, which is equivalent to a 25% stake, change hands via off-market deals at steep discounts to market price.

The share sales followed hard on the heels of the demise of one of Sycal’s shareholders — Datuk Bujang Buyong or Datuk Ujang Bagong as he was better known.

Bujang was a political figure who was well liked for his philanthropy, particularly in Kajang. He was a member of Umno’s Hulu Langat division and also served at Pekida (Persatuan Kebajikan Islam & Dakwah Islamiah Malaysia).

His indirect 4.49% stake in Sycal through Cygal Holdings Sdn Bhd is also controlled by Syed Zain Al-Kudcy.

The ownership changes may have prompted some investors to wonder what is in Sycal that has drawn so much interest.

Sycal has been hovering in the 40-sen range since the heavy selldown in global equity markets in August when its share price tumbled more than 30% to a low of 34 sen on Sept 1. Last Thursday, it closed at 42 sen, giving the company a market capitalisation of RM134.5 million.

Nevertheless, the current price band does not reflect Sycal’s net asset value of 73.9 sen as at June 30. The stock seems to be undervalued, trading at a 12-month trailing price-earnings ratio of barely five times.

For the financial year ended Dec 31, 2014 (FY2014), its net profit leapt 40% from the previous year to RM23.85 million or 7.45 sen per share. Revenue grew 37% year on year to RM402 million.

Sycal’s latest earnings show that its growth momentum continued in the first half of FY2015 — it reported a 23.2% increase in net profit to RM10.5 million or 3.28 sen per share while revenue expanded 24.7% to RM195.3 million. The improved earnings were attributed to a shopping mall project in Ipoh that was 90% completed and due to be handed over in August.

“The board is of the view that, with the group’s construction order book of approximately RM550 million as at Aug 24, 2015, and the group’s ongoing development projects in Taiping, Segari and Ipoh, the overall operational performance for the year ending Dec 31, 2015, is expected to be satisfactory,” it said in notes accompanying the announcement of its quarterly results.

The company’s ongoing projects have a remaining gross development value of RM500 million, according to its annual report. To add to that, Sycal last year entered into a joint venture to build a mixed-use development in Perak.

As the company does not have much land, this project might become the jewel in its crown. Sycal owns 5.37 acres of freehold development land in the Senai-Kulai district in Johor.

It has been sitting on this parcel since 1997 and as at Dec 31, 2014, its net book value was RM16.2 million. A revaluation of the land could mean a substantial gain for the group in time to come.

New shareholders at Sycal

The first of the share transactions came on Oct 2 when Fantastic Hallmark Sdn Bhd emerged as a substantial shareholder with the purchase of 17 million shares or a 5.3% stake in the company.

The shares were traded for 23 sen apiece — which was at a 38% discount to market value — for a total of RM3.9 million.

Then on Oct 12, Fantastic Hallmark bought 18.2 million shares or a 5.68% stake and the same amount again on Oct 19.

The blocks were transacted at 26 sen and 28 sen per share respectively, translating into a 35% and 38% discount to market price. This valued the two blocks at RM4.7 million and RM5.1 million each.

Fantastic Hallmark forked out altogether RM13.7 million for a 16.66% stake in the company.

According to filings with Bursa Malaysia, Fantastic Hallmark is controlled by one Mohd Wazir Khalid and Suzanna Mohd Nor, who are now deemed indirect shareholders of Sycal.

Later on Nov 2, another chunk of 26.7 million shares, equivalent to an 8.33% stake in the construction player-cum-property developer, changed hands via an off-market deal. This saw the entry of Westhill Capital Sdn Bhd into the company and Teo Kok Keong and Hew Kok Long as its shareholders.

At 25 sen apiece, this block of shares was also transacted at a sharp discount of 39% to market price. The stock ended at 41 sen that day.

To date, it is unclear who the sellers of the shares are but one suspect stands out.

According to Sycal’s 2014 annual report, Pengurusan Danaharta Sdn Bhd was its single largest shareholder with a 22.71% stake. Second was Danaharta Managers Sdn Bhd with 10.62%, but it may have been overtaken by Fantastic Hallmark.

Interestingly, checks with Companies Commission of Malaysia show that upon registration, both Fantastic Hallmark and Westhill Capital had the same shareholders: equal owners Lim Boon Huay and Yap Kian Mun. And the two firms had the same registered address.

This information is as per registration in 2013 and circumstances might have changed. That said, the duo is known to be in the business of incorporating and selling shell companies.

Westhill Capital’s directors are Dr Chua Seng Boon, Chua Seng Oun and Koh Kim Oon. The Chuas are still shareholders of Sycal, according to its annual report. Seng Boon owns a 1.34% stake while Seng Oun has 2.09% held by nominees.

Koh is also a director at Fantastic Hallmark, alongside Mohd Wazir and Perak royalty Raja Muzaffar Shah Raja Musa.

With a quarter of the company’s shareholding having changed hands, it would be interesting to see what these new shareholders have planned for Sycal.

Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

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.