KUALA LUMPUR: QL Resources Bhd successfully defended its shareholding in Lay Hong Bhd from being diluted by blocking resolutions to grant share issuance scheme (SIS) options to Lay Hong’s executive directors at the latter’s extraordinary general meeting (EGM) yesterday.

Lay Hong managing director Yap Hoong Chai and three executive directors Yeap Weng Hong, Yap Chor How and Yeap Fock Hoong who had to abstain from voting, were all denied the SIS options during the meeting.

The polls conducted during the EGM saw only 11.11% of shareholders’ vote in favour of granting SIS options to Hoong Chai. Weng Hong, Chor How and Fock Hoong garnered 23.54%, 12.7% and 23.77% of shareholders’ ballot respectively. However, QL, the second biggest shareholder of Lay Hong with a 38.53% stake, voted in

favour of the group establishing a SIS and granting SIS options to Lay Hong chairman Datuk Dr Abdul Aziz Mangkat, executive director Ng Kim Tian and non-executive directors Cheng Chin Hong, Gan Lian Peng and Tan Ooi Jin.

“We (QL) did not vote for the SIS for the four Lay Hong executive directors because we do not think that they should be issuing shares to themselves,” QL group accountant and investor relations officer Freddie Yap told The Edge Financial Daily yesterday. Yap added that QL (fundamental: 1.1; valuation: 1.1) saw Lay Hong’s move to grant SIS options to its executive directors as a way to dilute QL’s current equity interest in the group, but dismissed the issue as “a small corporate thing”.

Meanwhile, Hoong Chai, whose family is a controlling shareholder of Lay Hong with a 42.45% stake, told reporters after the EGM yesterday that the poll results were both “fair and normal given the current situation”, referring to QL’s failed attempt to take over Lay Hong back in December last year. At the time, QL made a takeover offer for Lay Hong at RM3.50 per share after QL’s sole representative and executive director Chia Mak Hooi on Lay Hong’s board was not re-elected during an annual general meeting.

“But if you look at it under normal circumstances when the executive directors have brought the company to profitability, they should be rewarded too [with the SIS options],” Hoong Chai said. He also brushed off suggestions that Lay Hong’s move to implement the SIS was to dilute QL’s shareholding in the group.

“The message is not correct,” Hoong Chai said. “The impression [in the market] seems to be that they (QL) were booted out [of Lay Hong’s board], but it was the shareholders who chose not to vote him (Chia) in. The Lay Hong board had proposed him to be re-elected,” he added.

Apart from the SIS, Lay Hong had proposed a private placement of up to 7.62 million new shares or 15% of the group’s enlarged share capital to third party investors. Both plans would help the poultry farmer comply with the public shareholding spread as required by Bursa Malaysia, but may at the same time dilute QL’s stake in the firm.

“We are not trying to dilute QL’s shares. We are using the money to grow the group and make every shareholder feel that the investment in Lay Hong is worth something,” Hoong Chai explained.

Hoong Chai also assured investors that the relationship between Lay Hong’s two biggest shareholders remains “very friendly”, with Lay Hong continuing to purchase raw materials from QL.

Earlier at the EGM, Lay Hong shareholders voted in favour of the proposed private placement which is expected to raise gross proceeds of up to RM23.1 million. With the private placement, Lay Hong’s public shareholding spread is expected to increase to 26% from 15.42% as at Dec 31, 2014.

Separately, Lay Hong (fundamental: 0.75; valuation: 0.8) is optimistic that its results for the financial year ended March 31, 2015 (FY15), which is expected to be announced by the end of this month, to be “much better than last year”.

This article first appeared in The Edge Financial Daily, on May 19, 2015.