Something interesting has been happening at Eka Noodles Bhd in the past few days. It saw the emergence of a new major shareholder set on turning around the loss-making noodle maker. What seemed like a board tussle ensuing has since simmered down with a new board firmly in place.
While all is not well yet for the Practice Note 17 (PN17) company, there are some positive signs. Besides the board changes, operations of a key subsidiary have resumed.
Eka Noodles slipped into PN17 last August and reported a hefty loss of RM32.5mil for its financial year ended Dec 31, 2016. Its external auditors have also issued a qualified opinion on the company’s auited financial statements for that period.
Over the week EKA Noodles’ shares rose by 29% to a high of 9.5 sen on Thursday although it has since settled at 8 sen.
This happened after the emergence of Tan Sri Tan King Tai as a new substantial shareholder with a 19.65% stake.
Tan acquired the block of shares amounting to 61.3 million units at an undisclosed price on May 8, via Vibrant Class Sdn Bhd. Assuming the share price then of 7 sen a piece, Tan would have paid RM4.2mil for those shares.
Interestingly, Tan was appointed to the position of chairman in EKA Noodles on the same day after his stake acquisition.
This was barely within a week after the company’s former chairman, Datuk Sohaimi Shahadan tendered his resignation, citing “personal work commitments”.
Sohaimi was previously the chairman of Pelaburan Mara Bhd and presently sits on the boards of listed companies PDZ Holdings Bhd and BHS Industries Bhd.
When contacted by StarBizWeek, Tan expressed his optimism to turnaround EKA Noodles as soon as possible, highlighting the promising prospects of the noodle manufacturer.
“Nothing (the restructuring of EKA Noodles) is difficult, given strong expertise and good management of the company. We are currently working on a restructuring plan and we plan to meet Bursa Malaysia as well as our creditors as soon as possible to resolve the financial difficulties of EKA Noodles.
“Now that we have a strong management on board, we are confident to pull Eka Noodles out of the red. Hopefully, in the next month, we will make public our plans,” said Tan, while adding that acquisition of new companies with the same industry is on the cards.
According to EKA Noodles’ 2016 annual report, the noodle maker has ceased operation for all of its plants since December 2017 due to financial issues. However, now with Tan on board, operations are expected to resume gradually.
In a filing with Bursa Securities on May 9, the company announced that its 100%-owned EKA Foodstuff Sdn Bhd has fully resumed operations while its another wholly-owned subsidiary Kilang Bihun Bersatu Sdn Bhd, will fully resume its operation by June 2017.
“EKA Foodstuff is principally engaged in the business of marketing of all type of rice and sago starch and related products produced by Kilang Bihun Bersatu. The Board expects the production activities of Kilang Bihun Bersatu to fully resume by next month,” stated the company in the filing.
Tan is no stranger in the corporate sector. With over 36 years of working experience in the fields of auditing, accounting and corporate finance, Tan is also currently on the board of directors of three other listed entities namely Pensonic Holdings Bhd, Muar Ban Lee Group Bhd and SWS Capital Bhd.
During his service at Pensonic, he successfully led the company to be listed Bursa Malaysia.
Tan’s first entry into EKA Noodles was in mid-December last year, after Vibrant Class acquired some 28 million shares or 8.97% stake in the noodle maker from another shareholder, Ang Eng Hooi. The acquisition made Tan the company’s second largest shareholder.
He further upped his control in the noodle maker on March 13, purchasing an additional 33 million EKA Noodles shares at 15 sen apiece from the company’s former group managing director, Datuk Seri Chin Seak Huat. Worth to be noted, Chin sold his stake to Tan at a substantial premium to the stock’s closing price of eight sen in the open market on the same day.
Tan’s rapid emergence in EKA Noodles had led to a boardroom tussle. Earlier this year, three shareholders including Vibrant Class, had requested for an EGM to remove all of its board members except Chin.
While the notice for the EGM has been withdrawn in an about-turn by the three shareholders, all the members of the board of director have since resigned.
“We now have new individuals on the board, with relevant expertise and skills to turnaround EKA Noodles,” said Tan. To note, EKA Noodles’ new executive director Fong Yit Meng is also the son-in-law of Tan.
It is apparent that Tan has well-positioned himself in the company. Now with Tan helming the chairmanship and wielding substantial control over EKA Noodles, a turnaround plan is expected to emerge to fillip the noodle maker into the black.
The Main Market-listed EKA Noodles triggered the PN17 criteria in August 2016 as its shareholders’ equity on a consolidated basis has fallen to 25% or less of its paid-up capital and was less than RM40mil in its unaudited interim financial results for the second quarter ended June 30, 2016.
On May 3, in a filing with the Bursa Securities, the company announced that it has approximately four months more to submit its regularisation plan to the relevant authorities for approval. EKA Noodles is a smallish company with a market capitalisation of RM26.5mil.
In its financial year 2016 ended December 31 (FY16), EKA Noodles recorded a net loss of RM34.11mil, despite achieving a top line of RM23.91mil in the same period. There were no comparative financial information available for the preceding year corresponding period ended 30 June 2015.
In FY16, EKA Noodles’ total liabilities stood at RM80.78mil, exceeding its total assets of RM59.17mil.
“As part of our restructuring drive, we will definitely pare down the debts and make the balance sheet leaner,” said Tan.