This article first appeared in The Edge Malaysia Weekly on July 21, 2025 - July 27, 2025

TEXTILE wholesaler and retailer Jakel Group, led by Datuk Seri Mohamed Faroz Mohamed Jakel, is said to be keen on taking up a 10% stake in Pharmaniaga Bhd (KL:PHARMA) through the latter’s new share placement.

Besides Jakel Group, the other interested investors include Great Eastern, Koperasi Angkatan Tentera Malaysia Bhd and shipping tycoon Tan Sri Halim Mohammad, according to sources.

Jakel Medical Sdn Bhd, a unit of Jakel Capital Sdn Bhd, will be the vehicle to subscribe for Pharmaniaga’s placement of over two billion shares that is expected to raise up to RM289.3 million, say sources.

The placement was priced at 13.5 sen apiece, a 6.6% discount based on the five-day volume-weighted average market price of Pharmaniaga shares of 14.46 sen as at June 16.

“Overall, the total placement shares make up about 25% of the enlarged issued share capital after the Pharmaniaga rights issue exercise,” a source says.

Notably, Pharmaniaga is in the midst of completing a renounceable rights issue of up to 3.52 billion shares at 10 sen per share on the basis of 12 rights shares for every five existing shares.

The new shares will be issued after completion of the rights issue. Hence, new shareholders buying shares via the placement will be spared the dilution caused by the rights issue.

With a 10% stake, Jakel Group will be the second-largest shareholder of Pharmaniaga after Lembaga Tabung Angkatan Tentera. LTAT’s direct and indirect shareholding will be diluted to 41.5% after the share placement, from 54.9% currently.

Pharmaniaga will be the second public-listed company in which Jakel Group will hold a substantial equity stake.

Jakel Capital emerged as the single largest shareholder of Cypark Resources Bhd (KL:CYPARK) in January 2023 with a 27.33% stake through a private placement exercise.

Jakel Capital is the investment arm of Jakel Group, whose core business includes property development.

Mohamed Faroz declined to comment when contacted. Pharmaniaga managing director Zulkifli Jafar, meanwhile, says the private placement has been completed but declined to furnish details. “We have received encouraging interest for the placement shares and they are actually oversubscribed, which indicates strong support from the existing shareholders and the market,” he tells The Edge.

It is understood that Pertubuhan Keselamatan Sosial (Perkeso), also known as the Social Security Organisation (Socso), had shown interest in subscribing for the Pharmaniaga private placement. A source says the fund later decided otherwise.

Pharmaniaga’s share price has been going downhill since the Covid-19 pandemic. The stock has shed roughly 77% in slightly more than four years, from 67 sen in May 2021 to 15.5 sen last Friday. The concessionaire that supplies and distributes medical products to public hospitals is valued at RM329 million currently.

The renounceable rights issue and share placement form a critical part of Pharmaniaga’s regulation plan to exit Practice Note 17 status. It slipped into PN17 status in February 2023 after a massive impairment of RM552.3 million brought about by unsold supplies of Covid-19 vaccines.

The impairment led to its worst quarterly net loss of RM664.39 million in the three months ended Dec 31, 2022 (4QFY2022). Its full-year net loss came to RM607.32 million in FY2022.

In April, independent auditor Ernst & Young PLT (EY) raised concerns about Pharmaniaga’s financial sustainability and its ability to continue as a going concern. This was the third straight year such concerns were flagged.

In its audit, EY highlighted that as at end-December 2024, Pharmaniaga’s current liabilities exceeded its current assets by RM748.8 million at the group level and RM827.2 million at the company level. The auditor also pointed out a capital deficiency of RM145.9 million at the group level, indicating “the existence of material uncertainties that may cast significant doubt on the group and the company’s ability to continue as a going concern”.

Despite the financial woes, Pharmaniaga was granted a seven-year concession for the supply of medical products and logistics services to public hospitals in January.

It currently has operations in Malaysia and Indonesia, the latter via its 73%-owned PT Millennium Pharmacon International Tbk, which is listed on the Indonesia Stock Exchange.

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