This article first appeared in The Edge Malaysia Weekly on September 11, 2023 - September 17, 2023

Independent adviser to Fitters Diversified Bhd’s minority shareholders, Wyncorp Advisory Sdn Bhd, revealed last week that the safety equipment manufacturer’s acquisition of 4.54% of Computer Forms (M) Bhd (CFM) for RM26.44 million and 4.78% of CFM’s warrants for RM8.33 million on March 7 and 8 this year — which resulted in a loss of RM26.19 million when sold more than a week later on March 14 to 22 — were “not reasonable and detrimental to the non-interested shareholders of Fitters”, which should give minority shareholders some comfort.

Fitters had bought into CFM to derive potential capital gains based on the future prospects of electric vehicles (EV) in Malaysia, a new business for CFM. However, there has been little advancement in CFM’s EV plans.

Wyncorp says in its circular to shareholders that “taking into consideration the sudden and sharp fall in the market prices of CFM’s shares and warrants, the disposals have effectively prevented the company from incurring further losses. Accordingly, we are of the view that the rationale for the disposals is reasonable and not detrimental to the non-interested shareholders of Fitters.”

So who is responsible for the losses incurred by Fitters? 

The acquisition by Fitters into CFM was deemed a related-party transaction by Bursa Malaysia — as Fitters executive director Hoo Swee Guan is also an executive director of CFM, while independent non-executive directors Wong Kok Seong and Kho See Yiing also sit on the board of CFM as a senior independent non-executive director and independent non-executive director respectively — which brought about the need for the independent adviser’s recommendation.

While Wyncorp’s findings may be justified in terms of Fitters making additional losses if the sale was delayed, there are, however, questions about the initial investment into CFM by Fitters, and how it could have gone through, especially when CFM and Fitters share common directors who should have known whether the EV plan was even doable.

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