FOLLOWING Scanwolf Corp Bhd’s extraordinary general meeting (EGM) in Ipoh last Wednesday, which saw seven directors removed, it has emerged that the boardroom tussle actually involves three parties.

They are the founding board members led by Datuk Loo Bin Keong, the previous board members led by Datuk Ch’ng Kong San and the new board members led by Cedric Wong King Ti and his elder brother William Wong King Nguong (see diagram).

Scanwolf has two flagship property projects — Kampar Putra and Taman Harmoni in Perak.

The Kampar Putra township project, which is in the vicinity of Kampar, has a gross development value (GDV) of RM180 million.

The Taman Harmoni project, which features a mix of residential and commercial properties in Bidor, has a GDV of RM27 million.

The combined GDV is more than 4.5 times Scanwolf’s market capitalisation of RM44.24 million.

This could be the main reason the major shareholders from the three camps are fighting to take control of the company.

Loss-making Scanwolf (fundamental: 0.55; valuation: 0.90) is a Perak-based home and kitchen fitting manufacturer. It ventured into property development in 2011.

The company was founded by Loo, executive director Datuk Tan Sin Keat and former director Michael Leuk Sing King, who ceased to be a substantial shareholder in July 2013.

Former CEO Loo owns a 7.36% stake in the company while Tan has 2.73% equity interest. In the same camp are former executive directors Datuk Jimmy Lai Kok Heng (1.71%) and Teoh Teik Kean (0.54%).

After the EGM, Tan and Teoh told The Edge that there was no rift among the founding board members, but they were dragged into the tussle between the Ch’ng and Wong camps.

“Initially, we didn’t care. We had been keeping quiet because we saw it as their boardroom tussle. But now that they have dragged us into it, we have to find out what happened,” says Teoh.

“I tried to work with the board formed by Ch’ng, but it didn’t work out,” says Tan.

To recap, the founding board members began losing control of the company from August last year, when Loo and Tan sold a 26.54% stake to David Chang Nyen Wee. Then, last November, Ch’ng emerged as a substantial shareholder after he subscribed for a 10% stake via a private placement.

Following a series of boardroom reshuffles between August 2014 and February 2015, Teoh, Lai and Loo quit their board positions one after another, leaving Tan as the sole founding member on the board. Teoh retired while Lai and Loo resigned due to personal commitments.

At the same time, Ch’ng took over as managing director while Chang was made the chairman, putting together a new board with their representatives. At present, Chang is the single-largest shareholder with a 19.83% stake and Ch’ng, the second largest with 8.68%.

Tan and Teoh claim that under this board, Ch’ng is the real decision-maker.

The Wong brothers came into the picture in January when their mother, Yii Long Ging, surfaced as a substantial shareholder with a 5.89% stake. She then raised her holding to 7.13%.

But the real tussle supposedly began in April when Yii, Cedric and Abdul Hamid Abdul Shukor made an attempt to oust three directors, including Ch’ng and Chang, at an EGM that was scheduled for May 13.

The three requisitionists hold slightly more than 10% equity interest in the company. However, the meeting was cancelled two days before May 13, as a shareholder, Yeoh Kean Beng, filed a suit to restrain Scanwolf from holding the EGM. The court granted the restraining order without giving any reasons.

Nevertheless, Chang and another director resigned before the court decision.

Interestingly, Scanwolf’s board of directors, led by Ch’ng, hired PKF Covenant Sdn Bhd to conduct a review of the company’s property development operation some two weeks after the requisition for the May 13 EGM.

From there, it escalated into a three-way fight, as most of the findings, as highlighted in PKF Covenant’s preliminary report, are not favourable to the founding board members from Loo’s camp.

Teoh recalls that when Chang, an associate of Ch’ng, bought the substantial stake from the founding board members, it was supposed to be a friendly takeover.

“Then, I don’t know what happened. After the requisitionists called for the EGM, only then was an investigation initiated. Before that, nothing happened. Just because they called for the meeting, you do all these things, within a short period of time, in a hurry to make announcements. What is the rationale?” he asks.

Eight possible irregularities have been identified in Scanwolf and its property development subsidiaries. The full review is expected to be completed soon.

“We were not given a fair hearing. All these accusations ... if there are grounds to them, go ahead and lodge police reports. We stand by what we have done over the years,” says Teoh.

Meanwhile, Cedric says he is investing in Scanwolf for the long term and hence, he wants more investigations to be carried out.

“I hope the incoming board will continue the investigation. I believe in transparency. We will even ask for a forensic investigation. To me, this is a public listed company, there has to be transparency in the interest of the shareholders,” he says.

Last month, Wong’s camp mounted another bid to oust all the directors of Scanwolf, replacing them with five candidates in last Wednesday’s EGM.

The second attempt at a boardroom coup was more successful than the first, as seven directors from Ch’ng’s camp, including Ch’ng himself, were removed from the board. Ch’ng did not turn up for the EGM.

Tan, who was the only board member present at the EGM, managed to retain his position as executive director, with support from Loo’s camp.

Meanwhile, Wong’s camp successfully put in their representative, William, as one of the five new non-executive directors.

Scanwolf’s board now consists of six members, with the managing director’s position left vacant following Ch’ng’s removal. It remains to be seen if the five new directors from Wong’s camp are willing to work with Tan, the only board member from Loo’s camp.

Another question is whether Chang and Ch’ng, as the two largest shareholders, will sell their stakes now that both are no longer board members.

Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in The Edge Malaysia Weekly, on June 22 - 28, 2015.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.