ON May 10, the Malaysian stock market was shaken by a series of startling announcements from Yong Tai Bhd, a Main Board-listed property developer renowned for its investments in tourism-related and property businesses.
These revelations sparked a wave of uncertainty and trepidation among investors, analysts and market watchers.
This upheaval, marked primarily by the exit of company founder and pivotal figure Datuk Wira Boo Kuang Loon has brought about concerns for the company’s future stability, particularly the minority shareholders.
Boo’s departure from his CEO and executive director roles leaves a significant leadership void in Yong Tai. His dynamic leadership had a transformative impact on the company, pivoting its focus towards ambitious tourism-related projects like Encore Melaka even amid a challenging property development landscape.
While its flagship project, Encore Melaka, was hurt by the unprecedented global health crisis when the COVID-19 pandemic hit us in 2020, Yong Tai has been on track to turn around following the re-opening of international borders.
The leadership transition brought to the fore new figures to the company’s top brass, including Datuk Leong Sir Ley as the new managing director and executive director as well as Tan Yoong Wei and See Tai Soon in other executive roles.
However, it’s Leong’s significant stake of 24.2% in Yong Tai (as of May 29) that vastly outnumbered Boo’s 5.01% which raises particular concerns.
Renowned as “iron lady of the Melaka property scene” via her private enterprise Sheng Tai International Sdn Bhd and the The Sail Melaka project, Leong’s experience in property development is by means not to be under-estimated.
However, her entry into Yong Tai has been interpreted by many market observers as a strategic move to raise funds for the landmark Sheng Tai project, hence simultaneously raises the question about potential dilution of stakes for existing shareholders through corporate exercises like private placements and rights issues.
Not only is the current spate of share acquisition by Leong and her vehicle Domain Capital Bhd “somehow resembling a backdoor listing”, according to people familiar with Yong Tai, the corporate exercise also bears semblance to scenarios that unfolded in the leadership structure and potential business shift of South Malaysia Industries Bhd and Bahvest Resources Bhd.
Both these companies have experienced significant share price drops following the announcement of new substantial shareholders, serving as a clear reminder of the potential risks associated with such corporate exercises.
Recall that Yong Tai reported losses of RM121.5 mil and RM135.3 mil in its 3Q FY6/2022 and 4Q FY6/2022 respectively which surpassed its market capitalisation of RM144.0 mil.
On a positive note, investors have seen Yong Tai returning to the black during the first nine months of its financial year ending June 30, 2023 with a net profit of RM2.9 mil after having incurred a net loss of RM211.24 mil in the corresponding nine-month period of FY6/2022.
This was, however, attributable to the initiatives undertaken by the previous management with the completion and handover of its Amber Cove property development. For the record, the project which marked the group’s first residential phase in Impression City is a 36-storey exclusive serviced apartment block located within 2.5km of Melaka’s UNESCO World Heritage Site
In conclusion, a new period of consolidation can be expected in the near-term following Yong Tai’s recent scaling of a new 52-week high of 52 sen on June 2 (from 32 sen prior to Leong’s entry on May 10) with investors likely to see some volatility in the form of share price adjustment.
The road ahead for Yong Tai seems fraught with challenges and only time will reveal how well its new management can cope with such challenges.
At Friday’s (June 2) close, Yong Tai was down 2.5 sen or 5% to 47.5 sen with 24.9 million shares traded, thus valuing the company at RM180 mil. – June 5, 2023
