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Should Minority Shareholders Accept the SCR at RM2.55?
Based on the proposed Scheme of Arrangement (SCR), the majority shareholder intends to buy out the minority shareholders’ 25.5% stake at RM2.55 per share.
The key question is: Is RM2.55 a fair price when TONGHER has an NTA of RM3.43 per share?
Based on TONGHER’s Q1 2026 financial report, the company had approximately:
Cash: RM163 million
Debt: RM10 million
Net cash: approximately RM153 million
The proposed acquisition of approximately 39.14 million minority shares at RM2.55 would require around RM99.8 million.
In other words, TONGHER appears to have sufficient cash to fund the entire SCR. After using approximately RM100 million, there could still be around RM53 million of net cash remaining.
This raises several interesting questions for minority shareholders.
The role of the three value investors
The SCR may also depend on several sophisticated Malaysian value investors who collectively hold more than 10% of the minority shareholding:
1. Dr Neoh Soon Kean
Founder of Dynasquest Sdn Bhd, a relatively low-profile value investor who was reported by The Edge Malaysia in 2017 to have achieved a 15.5% annualised return over 37 years.
His family investment vehicle, Neoh Choo Ee & Company Sdn Bhd, holds approximately 5.13% of the minority shares, while Dynasquest holds another 0.56%.
2. Tan Teng Boo
Founder of Capital Dynamics and frequently described in the Malaysian media as the “Warren Buffett of Malaysia”.
The listed closed-end fund iCapital managed by him holds approximately 4.82% of the minority shares.
3. Chang Mun Kee
Founder of JobStreet and currently a major shareholder of JcbNEXT Bhd. JcbNEXT's 2025 annual report indicates a focus on investing in value and dividend-paying companies.
Little Rain Assets Limited, an investment vehicle associated with the Chang family, holds approximately 1.35% of the minority shares.
Together, these three investors represent a meaningful block of minority shareholders.
So why are they still holding?
This is perhaps the most interesting question.
If TONGHER is fundamentally worth only RM2.55 per share, why would experienced value investors continue to hold their positions despite the company's relatively weak share-price performance over the past two years?
Could they be seeing something that the market is missing?
There are also several questions that minority shareholders should consider:
1. Why has the share price underperformed despite TONGHER having substantial net cash and an NTA of RM3.43?
Is the market correctly pricing the business, or is there a significant valuation gap?
2. Why did the dividend decline after 2022?
Was the reduction simply due to the company's capital requirements, or has cash been accumulating in preparation for the proposed SCR?
3. If TONGHER has sufficient cash to fund the SCR, why is the company using its own cash rather than the majority shareholder funding the acquisition personally?
This is particularly important because the economic outcome can be very different depending on who funds the transaction.
If the majority shareholder is effectively using TONGHER's balance-sheet cash to acquire the minority shares, minority shareholders should ask whether RM2.55 adequately reflects the value of the cash and other assets they are being asked to surrender.
The key issue is not simply RM2.55 vs RM3.43
The NTA of RM3.43 does not automatically mean that the shares are worth RM3.43. NTA can include assets that are difficult to monetise or businesses that deserve to trade below book value.
But equally, RM2.55 should not automatically be regarded as fair simply because it represents a premium to the prevailing market price.
Malaysia Small Cap and Mid Cap Mutual Fund Holding
MPI had the highest holding in term of value and percentage holding by seven morningstar 4 stars and above unit trusts.
TGUAN is expanding their business more compare to BPPLAS and SLP. Their expand through loan and retain earning. Hence their dividend payout ratio and dividend yield is low compare to the others.
Industry Comparison Packaging
-> TGUAN make three times more revenue compare to BPPLAS and SLP
-> TGUAN had debt compare to BPPLAS and SLP which do not had debt
-> TGUAN had higher growth in Asset compare to BPPLAS and SLP
-> TGUAN had operation is oversea compare to BPPLAS and SLP which only operated in Malaysia
Industry Comparison (Packaging)
-> BPPLAS has 46.73 higher revenue in 2020 compare to peer of similar size SLP
-> BPPLAS had loweest P/E among the companies in comparision (BPPLAS, SLP and TGUAN)
-> BPPLAS had high dividend yeild and reasonable dividend payout ratio
-> Covid 19 had increased the world logistic demand hence the demand of PE films and Bag had increased.
-> BPPLAS provides PE films and bag for food and beverage which is essential business hence its manufacturing plant is able to operate during Movement Control Order with compliance of SOP set by the Government of Malaysia.
-> Since 71.14 % of BPPLAS revenue are from export, the increasing of container cost over the world after convid 19 might affect the profit of BPPLAS.
-> BPPLAS had nett currency exposure of US dollar of - RM 27,538,255, strengthening of USD after March 2021 would decrease the profit of BPPLAS.
-> Investment on the new 9th Cash Stretch Film Machine expected to be completed by the end of 2021.
-> One of the manufacturing plant had close down for 10 day on March 2021 due to Convid 19 cases. This might affect the production and revenue of BPPLAS.
-> BPPLAS had low growth in revenue over the 5 year period however its net profit is growing at 10.66 % which indicated the management had done well in cost management.
-> Despite pandemic BPPLAS manage to control its trade receivable past due at 19.85% in 2020.
-> BPPLAS has no debt and is cash rich. 67.60 % of the 2020 cash balance is in a short term investment fund earning interest of 2.52 %.
-> BPPLAS had increase its trade payable from RM 34,163,325 in 2019 to RM 68,582,231 in 2020 mainly due to increase of their purchase in raw material in 2020. BPPLAS manages to purchase more raw material in 2020 when the raw material price is low. There is less concern on the increase of trade payable because BPPLAS had RM 84,0466,187 in cash and short investment which was able to pay their supplier.
-> BPPLAS is trading at 12% discount from TGUAN P/E and 49 % discount from SLP P/E and has a dividend yield higher than 10 years Malaysia Government Bond over the past 5 years.
Hi Cheng, private placement had completed on 13 July 2021.
The extension of HOA it had been extended for three time already I do not factor it into the consideration when planning to purchase the stock. RM 500,000 deposit still lock there without any interest. It is going to be bonus if the HOA signed.
-> GFM customer mostly are government or government link companies, political unstable might affect the revenue of GFM if their maintenance contract is not extended
-> Has operating lease of RM 312,522,869 until 2035 for UiTM. Stable income until 2035. Around RM 45,000,000 of 37.90 % of the 2020 revenue is secured until 2035.
-> 10 % partnership for EPCC contract to build Solar System for 6 number UiTm campus. RM2,713 per kWp which is a reasonable price during the signature of contract however with current increasing and unstable cost of photovoltaic cells the price might be a bit tight. RM 3,000,000 to GFM is completely done
-> Acquisition of 49 % in Highbase Strategy Sdn Bhd (HSSB) - O&G downstream company. RM 2,882,359 for 49 % of share. Projected value of HSSB contract until 2024 is RM 261,100,000 (estimated RM 102,351.20 - 0.8 safety factor)
-> GFM had a call option to purchase 2 % of HSSB share at RM0.51 (49 % discount) until 31 July 2024. GFM management can exercise the option and make HSSB subsidiary of GFM when they think HSSB is profitable for the company
-> GFM plans to subscript Rm 15 million to RM 20 million of RCPS with a fixed 6 % per annum.
-> GFM proposal to acquired AMZASS (M) Sdn Bhd which had contract to upgrade existing plus highway north bound and south bound Benbam lay by in state of Malacca into rest area. However it had proposed three time. Latest Stop date is 30 September 2021. RM 500,000 deposit had been paid to AMZASS.
-> ESOS and Warrant are out of money at the point of writing.
-> GFM took out RM 317,530,520 (96 % of 2020 total debt) to support the concessionaire with UiTM which had operating lease of RM 312,522,869 until 2035
-> GFM had positive flow in free cash flow while negative growth in price. The price did not growth with the company's free cash flow.
-> Ascending triangle, continue upward trend if price break RM 1.17
-> Maximum Drawdown 29.44 %
-> Altman Z Score 2.38
-> Cost of Equity using CAPM 3.45 %
-> Growth Rate 3 %
-> Manufacturing Formulation and Sale of Resin, Chemical and Building Material (76.21 % of 2021 revenue)
-> Contract work, Pipe Laying and Rehabilitation (12.96 % of 2021 revenue)
-> Negative growth of revenue -4.74 %
-> Positive growth of nett profit 9.12 %
-> 80.99 % of account receivable for 2020 had pass due
-> negative growth of free cash flow -12.76 %
-> price is lower than book value per share
-> Low dividend yeild lower than 10 year Gorvernment Bond
