KUALA LUMPUR (Sept 7): Fitters Diversified Bhd’s acquisition of shares and warrants in Computer Forms (M) Bhd is not reasonable and detrimental to non-interested shareholders, according to independent advisor Wyncorp Advisory Sdn Bhd.
In a circular issued by Fitters to shareholders on Thursday, Wyncorp Advisory said the related-party acquisition in March is premature, not substantiated by prevailing fundamentals and involves a high degree of investment risks.
Wyncorp Advisory’s view is premised on Computer Forms being in a loss-making position and its net asset per share being significantly lower than the prevailing market share price, as well as its share price being relatively volatile and recording a rapid increase despite the company’s financial performance not turning around yet.
“Premised on the above, we are of the view that the rationale for the acquisitions is not reasonable and detrimental to the non-interested shareholders of Fitters,” said the independent advisor.
Fitters had acquired 4.54% or 12.14 million shares in Computer Forms between March 7 and 8 for RM26.44 million, together with 4.78% or 6.18 million warrants for RM8.33 million.
The transactions had been deemed related-party by Bursa Securities as Fitters executive director Hoo Swee Guan is also an executive director of Computer Forms, while independent non-executive directors Wong Kok Seong and Kho See Yiing also sit on the board of Computer Forms as a senior independent non-executive director and independent non-executive director respectively.
For the three-month period ended June 30, 2023, Computer Forms posted a net loss of RM2.28 million on revenue of RM6.1 million. There are no comparative figures as Computer Forms had changed its financial year end from end-March to end-September.
Meanwhile, its net asset per share as at end-March stood at 50 sen. According to Wyncorp Advisory, Fitters bought the shares and warrants at an average unit purchase price of RM2.1716 per share and RM1.3443 per warrant.
In turn, the independent advisor said the proposal to ratify the disposals of the Computer Forms shares is reasonable and not detrimental to the non-interested shareholders of Fitters.
“While we take cognisant that the acquisitions were initially undertaken with the aim of deriving potential capital gains in the Computer Forms shares and warrants based on the future prospects of the EV (electrical vehicle) market in Malaysia, we are of the view that the decision by Fitters to proceed with the disposals is a reasonable and appropriate measure at that point in time to prevent the company from incurring further losses,” it said.
Wyncorp Advisory recommended non-interested shareholders to vote against the proposed acquisition ratification, while voting in favour of the proposed disposal ratification.
“In the event that the proposed acquisition ratification is not approved by the non-interested shareholders of Fitters at the forthcoming EGM, the proposed ratifications will be deemed not approved in its entirety,” the independent advisor said.
"Consequently, Fitters and its directors will be held liable for their oversights in seeking the prior approval from the shareholders of Fitters before undertaking the acquisitions and disposals, and shareholders of Fitters may seek recourse as permissible,” it added.
Fitters previously justified its acquisition of the Computer Forms shares by citing the latter’s involvement in the EV industry, specifically its joint venture with EA Mobility Holding Co Ltd to sell, distribute and produce EVs in Malaysia.
Citing a bourse filing on Tuesday, Wyncorp Advisory said in its circular that Computer Forms is in the midst of terminating its JV with EA Mobility.
Shares in Fitters ended unchanged at four sen, giving the company a market capitalisation of RM86.91 million. Computer Forms closed half a sen or 2.94% higher at 17.5 sen, valuing the company at RM45.45 million.