This article first appeared in The Edge Malaysia Weekly on March 23, 2020 - March 29, 2020
TIGER Synergy Bhd may look unexciting to most investors. For the last five years, the small property developer has not turned a profit. Its net loss for the 18 months ended Dec 31, 2019 (FY2019), was RM8.81 million on revenue of RM19.94 million.
In addition, it has not launched any new projects in recent years due to the soft property market. Its only completed project is Bukit Sri Putra in Sungai Buloh, Selangor, featuring 170 three-storey link houses.
As at Dec 31, 2019, it had RM2.18 million in cash and cash equivalents and RM9.06 million in borrowings, resulting in a net debt position of RM6.88 million. Its share price has dropped 36% in the past year, closing last Wednesday at 4.5 sen, giving the company a market capitalisation of RM65.91 million. But recently, the company was embroiled in a boardroom feud between its current board of directors and major shareholder Goh Ching Mun, which raises the question: what is the attraction in Tiger Synergy?
Goh, via his private investment vehicle, Safari Alliance Sdn Bhd, sued the company last month to invalidate the notice of an extraordinary general meeting (EGM) issued by the board and scheduled for Feb 20. At the time, Goh had a 13.43% direct stake in Tiger Synergy and 11.83% indirectly via Safari Alliance.
Safari Alliance had earlier issued its own EGM notice for March 2, to replace all seven existing directors — including executive chairman Datuk Tan Wei Lian, his sister Shirley Tan Lee Chin, who serves as deputy chairman, and managing director of the company, and his wife Datin Sek Chian Nee, an executive director — with seven of its own nominees.
This was unsuccessful as Goh managed to garner support from only 35.01% of voting shareholders. He has since been paring down his stake in Tiger Synergy. As at March 16, he had a 4.91% direct stake and a 6.7% indirect stake.
Wei Lian, his sister and wife had a total direct and indirect equity interest of 4.8% in Tiger Synergy as at March 19.
Goh’s spokesman, Mak Lin Kum, tells The Edge that the entrepreneur is no longer interested in Tiger Synergy. “Having said that, things can change and this is a fluid situation.”
Goh, best known for co-founding the OldTown White Coffee restaurant chain, emerged as a substantial shareholder in Tiger Synergy in November 2018, with an 8.57% stake purchased on the open market at an average price of 5.5 sen per share.
The company was already loss-making. In FY2018, it reported a net loss of RM3.73 million on revenue of RM10.57 million. But this did not deter Goh from investing in Tiger Synergy.
According to Mak, Goh’s emergence as a substantial shareholder two years ago created uneasiness among the company’s old guard, specifically some of the board members who had been around since as early as 2010, when Tiger Synergy changed its name from Minply Holdings (M) Bhd. “The board probably viewed the sudden emergence of a new substantial shareholder as a threat. A face they were totally unfamiliar with and whose intentions were unknown.”
Irreconcilable differences
Goh complained about what he saw as discrepancies between Tiger Synergy’s announcements to Bursa Malaysia and the company’s quarterly financial results.
“He noted that several ‘red flags’ had come to his attention in the unaudited accounts for FY2019. This stems from the sudden resignation of the company’s external auditors Messrs UHY on Sept 11 last year, without any reason given,” says Mak.
For one, Goh had claimed that millions in cash were not properly accounted for, arising from shares issued during the financial year.
Mak points to a circular issued on May 4, 2018, that shows the company proposing to raise RM75 million through the issuance of redeemable convertible notes, which was implemented between June 2018 and last month.
“The circular stated that the proceeds from the notes issue would go towards property development expenses and for working capital. If that is so, how is it that the company’s property development costs (which are costs attributable to development activities) still remained high, at RM117.31 million as at Dec 31, 2019, compared with RM119.59 million as at June 30, 2018, despite money being raised?” he asks, adding that Tiger Synergy’s cash and bank balances stood at only RM1.86 million as at Dec 31, 2019.
He also questioned how the company could incur property development costs without any new projects being launched.
Mak points out that in the May 2018 circular, the company had said that it expected to launch a new project — called Telaris Alam Impian in Shah Alam, Selangor — in the fourth quarter of 2018. It was slated to be its flagship development project, spanning 13.5 acres.
However, in a December 2019 filing with Bursa Malaysia to announce a proposed rights issue and private placement, the launch date was changed to the third quarter of this year.
Lee Chin acknowledges in a separate interview with The Edge that the company had raised some funds as it had planned to launch new projects. However, the launches were deferred, given the current soft market conditions.
She says the company remains on track to launch Telaris Alam Impian later this year. Initially planned to offer 945 condominium units and 12 three-storey semi-detached houses, with a total gross development value of RM460 million, the project has been scaled down to 227 two-storey link houses with a GDV of RM250 million, to reflect the current market conditions. Other projects in the pipeline this year include a joint-venture (JV) project comprising 640 medium-cost apartments on a nine-acre parcel in Shah Alam, with a GDV of RM180 million.
“These two new projects will keep us occupied for the next two to three years,” says Lee Chin.
On the property development costs disclosed in its FY2019 results, Lee Chin says this is due to the costs of the JV agreements entered into with the owners of the development parcels and the expenses incurred in obtaining approvals and licences from the authorities.
“The property development costs entail the costs for five or six projects,” she says, without elaborating.
Lee Chin says Tiger Synergy’s outstanding projects now stand at RM1.2 billion in GDV.
Its 2018 annual report shows that its other future projects include an affordable housing project on 5.5 acres in Sungai Buloh, Selangor, with a GDV of RM160 million and Telaris Gombak on 1.169 acres in Gombak, Kuala Lumpur, with a GDV of RM150 million — which could be the group’s first commercial development. The Aster Residence Cheras apartment development will be built on 0.81ha in Cheras, Kuala Lumpur, with a GDV of RM96 million. The company also owns a 1.875-acre parcel in Seri Kembangan and 2.97 acres in Bukit Serdang, Selangor, which are in the planning stages.
Mak points out that most of Tiger Synergy’s projects are on a JV basis with the land not owned by the company. Furthermore, some of the agreements were signed in 2013 and 2014, and there is little progress to show, leading to questions as to whether these JVs are with persons closely connected to the management.
Lee Chin insists there is no issue between Tiger Synergy and the landowners as the latter understand the current market situation. “They are also agreeable for us to revise our plans because the current situation is different [from when the agreements were signed].”
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