Advancecon Holdings Berhad: Comprehensive Update on Share Buy-Back and RRPT Mandates

Overview

Advancecon Holdings Berhad has issued a detailed statement and circular to shareholders regarding two key proposals to be tabled at its Twenty-Ninth Annual General Meeting (AGM) scheduled for 18 June 2026. The proposals are:

• Renewal of Authority for Share Buy-Back (up to 10% of issued shares)
• Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions (RRPTs) of a revenue or trading nature

These proposals have the potential to impact the company’s share capital structure, earnings, and governance, and thus could be price sensitive and of significant interest to current and prospective investors.

Key Points from the Report

1. Proposed Renewal of Share Buy-Back Authority

• Scope: Renewal to allow purchase of up to 10% of issued shares (maximum 58,473,190 shares based on the latest issued share capital of 584,731,900 shares as at 1 April 2026).
• Effective Period: From approval at the 29th AGM until the next AGM, expiry of the legal period for holding the next AGM, or until revoked, whichever is earlier.
• Funding: Buy-back will be funded entirely from retained profits (audited retained profits as at 31 Dec 2025: RM25.86 million). Can use internally generated funds and/or bank borrowings.
• Share Treatment: Purchased shares can be cancelled, retained as treasury shares, distributed as share dividends, resold, or used for employee share schemes.
• Purchase Price: Max price not more than 15% above the weighted average market price of the last 5 market days.
• Potential Impacts:
  • EPS and return on equity could improve if share capital base is reduced.
  • NA per share may increase or decrease depending on buy-back price vs NA per share.
  • May enhance share price stability, improve investors’ perception, and provide the company with flexibility in capital management.
  • Reduction in working capital; impact on dividend policy due to cash outflow for buy-back.
• Shareholding Effects: If shares are cancelled, major shareholders’ percentage holdings will increase. This could potentially trigger a mandatory take-over offer requirement if thresholds under the Malaysian Code on Take-Overs and Mergers are crossed.
• Public Shareholding Spread: Company will ensure public shareholding does not fall below 25% as required by Bursa Malaysia.
• Recent Activity: In the twelve months up to April 2026, Advancecon bought back over 10 million shares at prices ranging from RM0.18 to RM0.21, financed by internal funds.

2. Proposed RRPTs Mandate

• Purpose: To renew and expand the mandate for Advancecon and subsidiaries to enter into recurrent related party transactions necessary for day-to-day operations, on terms not more favourable to related parties than to the public.
• Key Related Parties:
  • Fook Hua Holdings Sdn Bhd (FHHSB)
  • Astana Armada Sdn Bhd (AASB)
  • Spring Blossom Sdn Bhd (SBSB)
  • Several individuals related to company directors, including the Yap family
• Material RRPTs Include:
  • Rental of office buildings from FHHSB
  • Purchase of bitumen, grease and lubricants from AASB and SBSB for use in heavy machinery and crusher plants

  Estimated Values (2026-2027):

  Transaction	Related Party	Estimated Value (RM’000)
  Rental of office building (FHHSB to SESB)	FHHSB	300
  Purchase of bitumen, grease, lubricants (AASB to SESB)	AASB	41,000
  Purchase of grease, lubricants (SBSB to SESB)	SBSB	780

• Review Procedures:
  • All RRPTs are reviewed quarterly by the Audit Committee and Board, with strict procedures to ensure transactions are at arm’s length.
  • Transactions above RM500,000 require Board approval; those exceeding RM1 million or 1% of percentage ratios require Audit Committee and Board approval.
  • Interested directors and major shareholders must abstain from voting.
• Material Litigation:
  • Ongoing lawsuit involving SESB (wholly owned by SERB, itself 51% owned by Advancecon):
    • Plaintiffs alleged SESB caused damage to land at Kampung Bukit Damar; claimed RM3.97 million in damages.
    • High Court dismissed special damages, awarded RM0.5 million general damages; SESB’s third-party claim dismissed.
    • Advancecon has filed an appeal to the Court of Appeal.
    • Potential exposure to further damages if appeal is unsuccessful.
• Directors’ and Substantial Shareholders’ Interests:
  • Several directors and substantial shareholders (notably Dato’ Yap Soon Huat and his family) have direct and indirect interests in related party companies involved in the RRPTs and will abstain from voting on relevant resolutions.
• Financial Impact:
  • The RRPT mandate is not expected to affect share capital, NA, dividend or gearing, but is anticipated to contribute positively to earnings.

Shareholder Considerations and Potential Price-Sensitive Issues

• Share Buy-Back could increase EPS and support share price if executed at advantageous times. Conversely, use of cash for buy-backs may reduce resources for dividends or other investments.
• Triggering of Take-Over Thresholds: Substantial shareholders’ percentage holding could rise, potentially triggering a mandatory take-over offer under Malaysian regulations if thresholds are crossed.
• Material Related Party Transactions: Large volumes of purchases from related parties (RM41 million for bitumen, grease, and lubricants) could raise concerns about transfer pricing, governance, or conflicts of interest if not managed transparently.
• Legal Proceedings: The ongoing lawsuit against SESB, if resolved unfavorably, could result in material damages or affect reputation.

Conclusion

The upcoming AGM proposals, particularly the renewal of the share buy-back authority and RRPT mandate, are significant corporate actions with the potential to impact Advancecon’s share capital, earnings profile, and governance. Investors should closely monitor the outcome of the AGM, developments in the related party transactions, and any updates on the ongoing litigation.

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