Shareholder changes at Rex Industry stir interest

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CHANGES IN shareholders’ interest coupled with the climb in share price of Rex Industry Bhd have prompted market observers to ask what could possibly be brewing at the little known canned food manufacturer.

Eyebrows were raised when Tan Sri Mohd Ibrahim Mohd Zain, a substantial shareholder and director of Brahim’s Holdings Bhd (Brahim’s), surfaced in the Penang-based, family-controlled company.

Mohd Ibrahim was appointed the company’s chairman and a director in June. Since coming on board, he has acquired almost 1.6% equity interest or 882,700 shares in Rex.

Through Fahim Capital Sdn Bhd and Brahim’s International Franchises Sdn Bhd, Mohd Ibrahim has 30% in the airline catering company, Brahim’s, partnering Datuk Ibrahim Ahmad Badawi, brother of former prime minister Tun Abdullah Ahmad Badawi.

Meanwhile, it is noted that the older generation of the family, which helmed Rex in the past, have passed the baton to their children.

Earlier this month, Lee Sze Whye, 37, who is based in Singapore, became a substantial shareholder after receiving a gift of 3.4 million shares or 6.1% equity interest in the company from a relative.

Similarly, Yee Wai Cheng, 40, also emerged as a substantial shareholder, controlling 5.6 million shares or about 10% of the company, after a gift from a parent.

Prior to the two surfacing, Yee Chek Mun had ceased to be a substantial shareholder after parting with 2.9 million shares or 5.2% to a daughter.  

Last month, Lee Hee Thiam, 57, a non-executive, non-independent director of Rex, ceased to be a substantial shareholder after he gave away almost 4.6 million shares, or nearly 8.2%, to his son, Lee Wei Hsien, 28.

On the same day as the shares were transferred, Hee Thiam’s spouse acquired almost 1.3 million shares, or 2.3%, at 97 sen a share. This same block was given by Lee Sew Keng, a sister of Hee Thiam, to their brother, Lee Siew Boy.

  It is noteworthy that Hee Thiam was managing director of Rex for 16 years from August, 1995, to September, 2011. After Hee Thiam stepped down, one Lee Chak Hiang assumed the helm.

However, in June this year, Chak Hiang quit to “pursue his own interests”, which was when Mohd Ibrahim Mohd Zain was appointed company chairman and a director.

Other than Chak Hiang, Mohd Faisal Izan Abdul Latiff, who had been on the board from 1996, and chairman since November 2013, also stepped down.

To fill the seat on the board, at the end of February this year, Ameer Shaik Mydin was appointed independent non-executive director. Ameer is managing director of Censoft Holdings Bhd, a technology company in which Mohd Ibrahim is chairman.

It is also noteworthy that Ong Choon Wah, formerly of Fraser & Neave Bhd and Nestle (M) Bhd, took over as CEO in early September this year.   

It is not known if Mohd Ibrahim has any plans for Rex or is merely a passive investor in the canned food company.

A market watcher thinks that Mohd Ibrahim could just be an investor, as he is in the oil and gas company Deleum Bhd, in which he has 5.2 million shares, or about 3.4%, and is among its top 10 shareholders. However, Mohd Ibrahim does not sit on the board of Deleum.

“He (Mohd Ibrahim) should be about 70 now, and has been linked with many groups in the past, so don’t read too much into him buying into Rex and being appointed chairman. Those days, there was Setron, and he was also [linked with] Pengkalan as well, besides other companies,” says the market watcher.  

Rex Industry’s shares are usually hardly traded on Bursa Malaysia. Interestingly, the stock has been on an upward trend since June. It hit an eight-year high of RM1.29 at end-August, up from 85 sen in early June. Rex closed at RM1.07 last Thursday.

In terms of financials, the canned food maker does not have much to shout about. Its earnings have been volatile. Rex returned to the black in the financial year ended Dec 31, 2012 (FY2012) after two loss-making years.

For the six months ended June this year, Rex posted lower net profits of RM2 million compared with RM3.02 million previously. Revenue declined to RM65.8 million from RM74.9 million. Earnings per share for the six months was about 3.57 sen, down from 5.39 sen a year ago.

Rex has global reach. Of its RM65.8 million revenue, some 40% was from Malaysia, 26.6% from the US, 18.8% from Asia (excluding home market), and 14.4% from Europe.

As at end-June this year, it had cash and bank balances of RM15.3 million, RM22.4 million in long-term debt commitments and RM427,000 in short-term borrowings.

It is also noteworthy that the company had RM73.3 million in reserves as at end-June and net assets per share of RM2.15, which is double its share price.

Notably, one of Rex’s assets is land. Its 1.3-acre tract in Mak Mandin, Butterworth, was last revalued in November, 2011. It also owns 7.7 acres in Seberang Prai, also in Penang, and two plots measuring 9.5 acres in Pasuraun, Jawa Timur, Indonesia, which had a net book value of RM10 million as at January, 2005 and September, 2012. It also has 6.9 acres in Jiedong Economic Development Experimental Zone, Guangdong, valued at RM9.4 million.

The land parcels in Penang — Mak Mandin and Seberang Prai — have 29 and 56 years remaining on their respective leases. One piece of land in Indonesia has more than 100 years remaining on its lease (there is no information available for the other piece), whereas the land in Jiedong has about 32 years remaining on its lease.

This article first appeared in The Edge Malaysia Weekly, on October 27 - November 2, 2014.