MSWG Weekly Newsletter 07 August 2020 (English)

Friday, 7 August, 2020


Virtual platform providers must not be scrutineers

MSWG has noted instances where the meeting platform providers for virtual general meetings, or its related organization, also double up as the Scrutineers. This is a conflict of interest.

According to Paragraph 8.29A (2) of Bursa Malaysia Listing Requirements, listed issuer is required to appoint at least one Scrutineer to validate the votes cast at a general meeting.

The Requirements further state that the Scrutineer must not be an officer of the listed issuer and must be independent of the person undertaking the polling process.

Arguably, the meeting platform providers, or its related organization, who also involves in the virtual polling process, can be deemed as, or as a part of, the ‘person undertaking the polling process’.

The Best Practice Guide on AGMs for Listed Issuers, issued by The Malaysian Institute of Chartered Secretaries and Administrators (MAICSA), outlines the roles of Scrutineers.

It states that the Scrutineers are appointed to preserve the integrity of the poll voting process and to ensure that the voting had been undertaken properly by observing the voting process, validating the votes and ensuring that the counting of votes had been carried out appropriately.

Again, these functions cannot be undertaken independently and objectively if the virtual poll-voting platform provider and the Scrutineer are the same person.

In addition, prior to the commencement of general meetings, scrutineer may also perform relevant testing of the system installed including the electronic voting system for the conduct of the AGM.

Obviously, when the poll-voting platform provider, or its related organization, and the scrutineer are the same person, there is an apparent conflict of interest; the Scrutineer cannot be seen to be independently perform their duty to conduct the testing on its installed system for the AGM.


Share registrars and its related organizations must not be scrutineers

In virtual general meetings, sometimes the share registrar, and/or a related organization of theirs, also doubles up as the platform provider, as well as Scrutineer of the meeting.

In such instances, there is also a lack of independence between the share registrar and the Scrutineer functions given the duty of the latter to monitor the poll voting process and validating the votes casted by shareholders.

The Guide further states that “communication between Scrutineers and the share registrar should be kept at a minimum to preserve independence”; surely this cannot be achieved if the share registrar, is also the Scrutineer.

MSWG requests listed issuers to ensure that the Scrutineers are independent of the poll-voting platform providers at virtual general meetings so that the reliability of the poll-voting system can be assured by a truly independent Scrutineer.


Reality check: Coping with thinning – or zero – dividend yield

Apple’s co-founder, the late Steve Jobs, was never in favour of his company paying a dividend, an exercise which coincidentally only commenced in 2012, a year after his death on 5 October the year before.

Jobs believed that a company with a lot of cash is a better investment since the cash will serve to bring it through business-related as well as systemic economic downturns. Moreover, cash would enable the company to pursue strategic options as they presented themselves.

Job is right to a certain extent given that when a company pays cash dividends to its shareholders, that results in a straight reduction of its retained earnings.

But for investors – especially those from the retail fraternity – dividends are often likened to a form of reward for their stockholding loyalty.

Beyond that, dividends can also fulfill their investment strategy; instead of lumping all their savings in fixed deposit (FD), they may choose to invest in high dividend-yielding bellwether or blue chip stocks whose returns can match or exceed the existing FD rate.

The notion is such that they can look forward to the best of both worlds – they can offload their stocks if the latter have generated substantial capital appreciation or otherwise, keep them and look forward to the dividend yield which can be more lucrative than the interest that they would have earned from their FDs.


Good times come and go

Such game plan is a remarkable strategy during the good times – when the economy is firing on all cylinders or thriving on solid fundamentals.

But today, investors at large are confronted with a stark reality. Amid the current low interest rate environment, they are unable to capitalise on what is perceived as “high-yielding dividend stocks” in lieu of stashing their savings in the form of FD.

The harsh reality of the current dividend landscape has very much to do with uncertainties of sorts caused by the ravaging COVID-19 pandemic.

Looming concerns over a second/third wave attack have led to downbeat forward expectations on earnings, thus prompting companies to turn conservative by preserving cash.

With the health crisis having taken the world by storm, Britain’s largest banks have agreed to scrap nearly £8 billion worth of dividends as mandated by the Bank of England in end-March to ensure financial institutions have an additional cushion to weather an economic downturn.

Back home, although local financial institutions are very unlikely to follow the footsteps of their British counterparts, there are already some red flags to watch out for.

The rendering of social service vis-à-vis the loan moratorium – initially for a period of six months which is supposed to end on 30 September but extended by another three months to accommodate targeted groups in view of the current tough economic times – is likely to take heavy toll on banks’ profitability.

Total losses stemming from banks being incapacitated from disbursing new loans worth RM79 billion over the six-month moratorium period from April to September alone are expected to reach RM6.4billion, according to Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz (StarBiz, 27 July 2020).


Dim prospects of a turnaround

On 1Q2020 alone, large cap companies (those with market capitalisation of at least RM2 billion) had slashed their aggregate dividend payouts by 31% to RM3.39 billion from RM4.91 billion in 1Q2019 (, 24 July 2020).

The analysis which is based on Bursa Malaysia filings included the top 100 companies showed that shareholders have seen a net reduction of RM1.52 billion in dividends for 1Q2020. Dividends slashed amounted to RM1.7 billion while higher dividend payouts amounted to only RM179.87 million.

And this has yet to include 2Q2020 when the full brunt of the pandemic effect can be observed (the Movement Control Order which was implemented on March 18 is due to end with the Recovery MCO on 31 August) or the final two quarters of the year when the absolute impact of the COVID-19 pandemic would fully manifest.

Weighing the current state of devastation the global economy has encountered with the International Monetary Fund projecting US12.5 trillion in cumulative loss for the world economy this year and next as a result of a global recession, dividend seekers may have to wait a while longer for good fortune to return.


Not all is gloom

Thankfully, concerns over thinning – or zero – dividend yield is unlikely to be an across-the-board phenomenon considering that there are some bright sparks with stocks in the glove, healthcare and tech industries as well as gold trading scaling unfathomable heights.

Backed by sustainable global demand, 2020 will turn out to be a bountiful year for glove producers with Top Glove Corporation Berhad having declared its first interim dividend of 10 sen per share for its financial year ended 31 August 2020. Its total dividend payouts for 2019 and 2018 were 7.5 sen and 8.5 sen respectively.

This follows the company’s record net profit of RM347.9 million for the quarter ended 31 May 2020 which is more than quadrupled from RM74.67 million in the same period last year.

Other recession-proof or defensive sectors include utility, telcos and consumer staples.

On a bigger picture, however, companies related to travel (airlines and cruises), leisure, hotel, restaurants or retail are likely to remain severely impacted by social distancing, travel restrictions  and other counter-measures put in place to stop the spread of the COVID-19 virus (what more if a second/third wave is triggered).

Elsewhere, the automotive and oil & gas sectors, too, will be impacted by a decline in vehicle sales and concerns over an oil glut stemming from a curb in movement and affordability with unemployment being a stumbling block to purchasing power.

Then again, there is the classic case of British American Tobacco (M) Bhd – once a darling dividend stock – whose dividend payout has been on a constant decline long before the COVID-19 pandemic reared its ugly head primarily due to the adverse effect of the tobacco black market.


Devanesan Evanson

Chief Executive Officer


MSWG AGM/EGM Weekly Watch 10 August – 14 August 2020

For this week, the following are the AGMs/EGMs of companies which are in the Minority Shareholders Watch Group’s (MSWG) watch list.

The summary of points of interest is highlighted here, while the details of the questions to the companies can be obtained via MSWG’s website at

Date & Time



11.08.20 (Tues)

10.00 am

Eduspec Holdings Berhad (EGM)

The EGM is to seek shareholders’ approval to the proposed consolidation of every 2 existing ordinary shares in Eduspec into 1 Eduspec share.

13.08.20 (Thur)
09.30 am

Syarikat Takaful Malaysia Keluarga Bhd (AGM)

Positive development for Takaful Malaysia with the signing of Bancatakaful Arrangements with RHB Islamic Bank for a five-year partnership.

The agreement will provide some certainty to shareholders on its earnings visibility going forward.

14.08.20 (Fri)
09.30 am

Heineken Malaysia Bhd (AGM)

FY20 will be a challenging year for Heineken Malaysia with pressure on market demand, sales, trade receivables and cashflow.

14.08.20 (Fri)
10.00 am

KKB Engineering Bhd (AGM)

KKB’s revenue for FY19 grew 35.6% y-o-y to RM559.3 million as compared to RM412.5 million in the year before. Its engineering division recorded strong growth of 39.1%, whilst manufacturing division grew 9% over the preceding year. 

14.08.20 (Fri)
10.30 am

Ajiya Bhd  (AGM)

Despite the competitive operating environment, Ajiya continued to be profitable in the financial year under review


One of the points of interest to be raised:


Points/Issues to Be Raised

Syarikat Takaful Malaysia Keluarga Bhd

1)   On 28 July 2020, Takaful Malaysia and its subsidiary Syarikat Takaful Malaysia AM Bhd have entered into two Bancatakaful Arrangements with RHB Islamic Bank Bhd (a wholly-owned subsidiary of RHB Bank Bhd) for the latter to sell, distribute and promote Takaful Malaysia’s family and general takaful products for a five-year period.

a)  The RM151 million combined facilitation fee for five years is deemed “hefty” compared to the RM110 million facilitation fee for a 10-year bancatakaful partnership entered between the same parties back in July 2015.

What are the reasons for the substantial increase in facilitation fee paid to RHB Islamic?

How significant is the contributions (premiums) generated from Takaful Malaysia – RHB Islamic bancatakaful partnership to the Group’s total contributions in FY19?

b)  What are the other bancatakaful service agreements (BSA) that will up for renewal or expire in the next two to three years? What is the likelihood of renewal/non-renewal of these BSA? 

Heineken Malaysia Bhd

  1. Cash flow of Heineken Malaysia is expected to be significantly affected in FY20 given slower cash collection from trade receivables and weaker demand from on-trade and tourism channels. With that, the Company plans to optimise working capital management and utilise borrowing facilities to ensure the ongoing liquidity of the Group (1QFY20 Quarterly Financial Results).

a)  To what extent will Heineken Malaysia’s cash flow in FY20 be affected by the slower collection of trade receivables and weaker demand? Apart from bank borrowings, will there be a need for Heineken Malaysia to raise fund via equity exercises?

b)  Will there be an increase in expected credit losses on trade receivables that have past due for more than 180 days in FY20? 

c)  In view of the priority to preserve cash, will there be any change in the Company’s dividend payout ratio which has been consistently above 90% in the past four years?

KKB Engineering Bhd

Finance costs was hovering around RM0.5m between FYE2015 to FYE2017. However, it increased by 176.8% from RM1.502m to RM4.158m for FYE2019. What is the reason for the hike? What is the anticipated finance cost, going forward?

Ajiya Bhd 

Moving forward, Ajiya is continually working on streamlining its business costs and increasing its operational efficiency. Among the initiatives undertaken are the adoption of Industrial Revolution 4.0, organisation restructuring and strategic manpower planning, liquidating non-productive assets, adoption of green sustainable energy sources such as solar roof to reduce electricity costs as well as better management of outstanding debts and payment terms of customers (Page 32 of the Annual Report 2019).

What is the progress on the adoption of Industrial Revolution 4.0?



Devanesan Evanson, Chief Executive Officer, ([email protected])

Linnert Hoo, Head, Research & Development, ([email protected])

Norhisam Sidek, Manager, Corporate Monitoring, ([email protected])

Lee Chee Meng, Manager, Corporate Monitoring, ([email protected])

Elaine Choo Yi Ling, Manager, Corporate Monitoring, ([email protected])

Lim Cian Yai, Manager, Corporate Monitoring, ([email protected])

Nor Khalidah Mohd Khalil, Executive, Corporate Monitoring, ([email protected])



•With regard to the companies mentioned, MSWG holds a minimum number of shares in all these companies covered in this newsletter.


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