Baffling shareholding changes at ES Ceramics

This article first appeared in The Edge Malaysia Weekly, on February 15, 2021 - February 21, 2021.
Baffling shareholding changes at ES Ceramics
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MARKET talk has it that ES Ceramics Technology Bhd may have a new substantial shareholder but details were scarce at press time. The recent shareholding changes at the company are perplexing, to say the least.

Filings on shareholding changes with Bursa Malaysia show that Tan San Kwang, son of ES Ceramics’ non-independent, non-executive director, Datuk Kamal Y P Tan, acquired 47 million shares or 10.2% in the company on Jan 29, for almost 58 sen per share or RM27.23 million.

Also on Jan 29, Kamal acquired 25 million shares (5.43%) at 58 sen per share (RM14.48 million) and sold it later in the day at the same price.

In a nutshell, Kamal via San Kwang acquired 10.2% in ES Ceramics, but also bought and sold another 5.43% in the company on the same day.

Kamal ceased to be a substantial shareholder in ES Ceramics in early November last year after selling 20.74% in the company. The question then was who the buyer was, as no new substantial shareholder controlling more than 5% equity interest surfaced — until now.

So, what is going on?

“It’s confusing, I don’t understand what’s happening,” one veteran market watcher says. Another seasoned market observer agrees that it does not make sense. “I don’t understand (enough) to comment on what he (Kamal) is doing.”

While all this has been going on, an individual, Rosli Hamat, has emerged as a substantial shareholder in the company after acquiring 24.55 million shares, or 5.33%, on Jan 27.

The notice that Rosli had become a substantial shareholder was made on Feb 4, the same day San Kwang surfaced and Kamal bought and sold the substantial stake in ES Ceramics.

Who is Rosli, and does he have any links to Kamal?

Another pressing question is why Kamal sold his 20.74% last November and, three months later, acquired a 5.43% stake only to sell it on the same day. And why didn’t he just transfer his shares to his son last November?

This is also a good time for ES Ceramics as its business is likely to boom. The company, which makes ceramic formers for rubber glove makers, has been among the beneficiaries of the Covid-19 pandemic.

This also raises questions as to why Kamal sold out of ES Ceramics in November when the company was likely to have a good run in earnings.

When he sold his stake then, ES Ceramics was trading at about 60 sen. Its share price shot up in late January this year, and climbed as high as 77.5 sen on Feb 8. It closed last Tuesday at 74.5 sen, translating into a market capitalisation of RM343 million.

ES Ceramics’ share price gained more than 220% in late July to early August last year. In late September to early October, it surged again, by more than 50%. On both occasions, the dips in the shares were as swift as the gains.

Attempts by The Edge to reach Kamal were unsuccessful.

Kamal’s assets

High-level executives of Singapore-listed Envictus International Holdings Ltd, for which Kamal is non-executive director and adviser, said it is difficult to contact him as he is “semi-retired”.

Companies under Envictus include Pok Brothers Sdn Bhd, which imports frozen foodstuff; Texas Chicken (Malaysia) Sdn Bhd and San Francisco Coffee Sdn Bhd.

A check with Envictus’ 2020 annual report indicates that as at Jan 11, 2021, Kamal and his brother Datuk Jaya J B Tan had 35.91% equity interest in the company. Envictus has a market cap in excess of S$31.65 million.

Envictus was previously known as Etika International Holdings Ltd, but changed its name after selling its dairy business in mid-2014 to Japan’s Asahi Group for more than RM1 billion.

Kamal has a 20.51% stake in Singapore-listed Lasseters International Holdings Ltd. He is a non-executive director of the company, which owns and operates a resort with gaming and hospitality offerings in Alice Springs, Northern Territory, as well as spa and wellness retreat businesses in Hunter Valley, New South Wales, in Australia, and a property development business in Malaysia.

Lasseters has a market cap of more than S$18 million.

The Edge also tried to reach Kamal through ES Ceramics, but did not get a response.

For the six months ended November last year, ES Ceramics registered net profits of RM7.21 million from RM27.53 million in revenue. Compared with the previous corresponding period, net profits were up by 253%, while revenue strengthened by 55.52%.

In notes accompanying its financials, ES Ceramics attributes the better numbers to “higher sales output from the additional production capacity due to strong demand of formers, improved production activities and higher selling price”.

As at end-November 2020, ES Ceramics had cash and cash equivalents of RM48.12 million and total debts of about RM230,000. It also had retained profits of RM26.59 million.

ES Ceramics has a plant in Kawasan Perindustrian Silibin, Ipoh, Perak, and another facility in Songkhla, Thailand. According to its website, the company was established in 1998, producing formers for examination gloves, but has since expanded to make formers for surgical, household and industrial gloves and balloons, among others.

A former is a ceramic mold, dipped into latex to manufacture rubber gloves, giving the glove the requisite shape.

The acquisition of this plant in Thailand by Kamal has resulted in legal disputes.

Longstanding dispute

In October 2019, a bankruptcy hearing against Kamal was advertised in a local paper, which The Edge understands has been disputed by him.

The creditor is Ong Yew Teik, the original owner of Thailand-based Euroceramic Technology Co Ltd (ECT), which Kamal acquired.

Ong is understood to have sold his 82.17% stake in ECT to Kamal for RM8.02 million in 2006 and based on court documents, he is claiming for the sum as it was purportedly not paid.

What is going on is unclear, as most would think that RM8 million is unlikely to leave a dent in corporate player Kamal’s coffers.

In mid-2008, Kamal and minority shareholders sold ECT to ES Ceramics for RM8 million cash. According to the circular to shareholders back then, his share of the RM8 million was RM6.57 million.

According to ES Ceramics’ announcements to Bursa Malaysia, the acquisition of ECT was concluded on Sept 15, 2008. Fillings with the bourse indicate that on Sept 29, 2008, Kamal acquired 6.06 million shares in ES Ceramics for an 11.44% stake in the company. In February the following year, he was appointed a non-independent non-executive director of ES Ceramics. By the time he was appointed to the board, he had accumulated 13.31 million shares or 25.13% in the company.

However, based on court documents, Ong is understood to be seeking financial compensation, and is not after Kamal’s stake in ES Ceramics. The question of Kamal selling assets, that is his shares in ES Ceramics, when bankruptcy proceedings have been initiated also adds intrigue to the mystery of the shareholding changes at ES Ceramics.

 

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