This article first appeared in The Edge Malaysia Weekly on August 19, 2024 - August 25, 2024

Last week, Sapura Resources Bhd’s (KL:SAPRES) board of directors said it had instructed managing director Datuk Shahriman Shamsuddin to abstain from running the company’s aviation business, and in the announcement made on Aug 15, they added that a board aviation management committee had been set up to handle the duties previously handled by him pertaining to the aviation business.

This move came about after news reports pointed out a potential conflict of interest because Sapura Resources has two aviation-related businesses — the wholly-owned Sapura Aero Sdn Bhd and DNest Aviation Sdn Bhd — while Shahriman in his personal capacity wholly owns Explorer Group Sdn Bhd.

It is significant that Brothers Capital Sdn Bhd, which has 51.84% equity interest in Sapura Resources, is jointly owned by Shahriman and his brother Tan Sri Shahril Shamsuddin of Sapura Energy Bhd fame.

According to filings with the Companies Commission of Malaysia, Shahriman has been a director of aviation player Explorer Group since 2019 and he has been a shareholder of Sapura Resources since its shares were floated as Uniphone Telecommunications Bhd in the late 1990s.

Shahriman’s potential conflict of interest was only highlighted when some angry minority shareholders of Sapura Resources voiced their displeasure at the company’s AGM in mid-July this year.

In Sapura Resources’ Aug 15 announcement, it acknowledged that there may be competition if Explorer Group, together with Royal Jet LLC, embarked on a business that was similar to its aviation division, which is the business of hangarage, ground handling and aircraft management and “potentially” private jet maintenance, repair and operations.

These are similar to the business activities undertaken by Sapura Aero and DNest Aviation.

Sapura Resources also said it was getting more information on the matter and assessing the options available to address “the competition and conflict situation”.

A look at Sapura Resources’ 2024 annual report reveals that executive directors — of whom Shahriman is the only one — received fees, salaries and other emoluments and benefits amounting to RM2.27 million, a handsome amount by most standards, for the year.

Sapura Resources may have businesses other than aviation but it is worth noting that the company suffered losses in four out of the last five financial years. For its financial year ended January 2024, Sapura Resources posted a loss of RM35.85 million on revenue of RM58.66 million.

In stark contrast, Explorer Group has been profitable in the last five years, raking in an after-tax profit of RM17.07 million from revenue of RM121.84 million in its last reported financial year ended December 2022.

The minority shareholders are demanding answers as to where Shahriman’s focus as managing director of Sapura Resources has been. Did he and the independent directors perform their fiduciary duty to protect and act in the best interests of Sapura Resources and its minority shareholders?

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