This article first appeared in The Edge Malaysia Weekly on September 8, 2025 - September 14, 2025

KIM Hin Industry Bhd’s (KL:KIMHIN) controlling shareholder Chua Seng Huat and his family have failed to take the Sarawak-based ceramic tile maker private at 85 sen per share, although the offer price was at 80% premium over the six-month volume-weighted average price.

This may come as little surprise, given that the offer price is significantly below the company’s revalued net asset value (RNAV) of RM3.10 per share. On that basis, independent adviser New Paradigm Securities Bhd has recommended that minority shareholders reject the offer, describing it as “not fair and not reasonable”.

Indeed, New Paradigm noted that the offer price is even less than half of the company’s net asset value (NAV) of RM1.88 per share.

While the offer represented an 80% premium over the six-month volume-weighted average price of Kim Hin’s historically thinly traded shares, the adviser argued that the cash exit opportunity did not justify the steep discount to asset value. It further noted that Kim Hin remained in compliance with public shareholding spread requirements, and that delisting was not mandated by regulation.

The independent advice circular confirmed what many shareholders may have suspected: Kim Hin’s assets were materially understated. A property revaluation exercise in May uncovered RM170.72 million in net surplus value across its Malaysian and Singapore holdings, lifting its RNAV to RM3.10 per share — more than triple the offer price. Several properties had not been revalued in over three decades.

The most prominent example was a 101-acre factory site in Kuching, Sarawak. Previously carried at RM16.75 million, the land was revalued at RM126.7 million — nearly eight times higher. However, some argue that the latest valuation of RM28.62 per sq ft, which was largely based on agricultural land benchmarks, likely understates its redevelopment potential. Situated just 11km from Kuching city and 6km from the airport, the site is considered well-positioned for township development, which could unlock significantly greater value.

This single asset alone revealed a valuation gap of over RM100 million, casting doubt on the adequacy of the controlling shareholder’s proposal. At its last close of 83 sen, Kim Hin’s market capitalisation stood at RM129 million — a figure that appears modest relative to its latent asset base.

Further compounding the undervaluation was the exclusion of Kim Hin’s 49.26-acre industrial land in Shanghai’s Zhujing Development Area from the May revaluation exercise. Still recorded at RM15.76 million based on a 1992 valuation, the property’s current market value — after three decades of urban growth — is likely substantially higher. Had it been included, the RNAV could have exceeded RM3.10 per share.

Notably, non-interested directors Datuk Sim Kheng Boon, Kho Soon Kheng and Aw Tai Hui had supported the adviser’s assessment and recommended that shareholders reject the offer.

Had Chua, the company’s executive chairman, heeded the views of the non-interested directors and tabled a “fair and reasonable” offer, the acceptance level might have been higher.

By the offer’s close on Aug 22, acceptances amounted to just 8.1 million shares (5.78%), raising the family’s stake to 68.34% — still well below the 90% threshold required for compulsory acquisition.

While the value of the land where Kim Hin’s factor is located has appreciated, its business however is not generating decent profit. 

The company has been bleeding red ink for seven conservative years. In the first half of 2025, it posted a further net loss of RM10.59 million. Its NAV per share had declined from RM3.15 in 2018 to RM1.82 by June 2025.

Revenue fell 22.71% over the last six years, from RM402.73 million in the financial year ended Dec 31, 2018 (FY2018) to RM311.25 million in FY2024. While losses narrowed from RM61.55 million to RM28.19 million, the company remained in the red for seven consecutive years. 

This well explains the slide in share price over the years.

Kim Hin’s share price had already declined from RM2.40 in May 2017 to below 40 sen by May 2025, as the group’s earning performance has been weighed down by soft property markets across its key operating regions — Malaysia, China, Australia and Vietnam — dampening demand for ceramic tiles.

Of Kim Hin’s 2,503 shareholders, 2,432 — or 97% — hold fewer than 100,000 shares, highlighting the company’s broad base of minority ownership.

The privatisation offer was launched on July 4 by chairman Chua and his family via Kim Hin (M) Sdn Bhd. At the time, the family held a 62.25% stake in the company and sought to acquire the remaining 37.75% — equivalent to 52.94 million shares — for RM45 million.

The offer made clear that the family did not intend to maintain Kim Hin’s listing status and would not restore the public shareholding spread if it fell below the 25% threshold. Should they secure at least 90% of the remaining shares, they planned to invoke compulsory acquisition provisions under the Capital Markets and Services Act 2007.

On Aug 15, Chua announced a one-week extension of the closing date of the offer to Aug 22. Meanwhile, Kim Hin also revealed that  its public shareholding spread had shrunk to 24.22%, breaching the 25% minimum required under Bursa Malaysia’s Main Market Listing Requirements.

On Aug 25, three days after the offer lapsed, Kim Hin made known that the company has yet to formulate any rectification plan to address the shortfall in the public spread requirement. The public shareholding spread had narrowed to 23.75% after the closing date.

“Accordingly, the company will apply to Bursa Securities for an extension of time to rectify the shortfall and will continue to monitor the level of the public shareholding spread and make the necessary announcements in relation to the status of public spread requirement in accordance with the listing requirements,” said Kim Hin in the bourse filing.

Rejecting an offer deemed “unfair and unreasonable” is a logical move. Realistically, the market is unlikely to value Kim Hin based on its RNAV, given its loss-making status — unless the tile maker takes active steps to monetise its assets.

Will the management, led by the controlling shareholder, pursue that path?

This episode may well be another example of minority shareholders getting the short end of the stick.

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