Tan Chong Motor Holdings Berhad: In-Depth Analysis of Share Buy-Back and Related Party Transactions Proposals for 2026 AGM

Introduction

Tan Chong Motor Holdings Berhad (TCMH) has issued a comprehensive circular to its shareholders detailing several key proposals to be tabled at the upcoming 54th Annual General Meeting (AGM), scheduled for 12 June 2026. The circular outlines two main proposals:

• Renewal of Authority for Share Buy-Back
• Renewal and New Mandates for Recurrent Related Party Transactions (RRPTs)

These proposals could have material impacts on the company’s share value, capital structure, and governance. Below is a detailed breakdown of the key points, implications for shareholders, and potential price-sensitive information.

1. Proposed Share Buy-Back

Key Highlights

• The Board seeks approval to purchase and/or hold up to 10% of its total number of issued shares at any point in time.
• The buy-back will be executed via Bursa Malaysia, financed through internally generated funds and specifically from retained earnings.
• As at 31 December 2025, TCMH’s retained earnings stood at RM2.34 billion. With 672 million issued shares (less 20.37 million treasury shares), the maximum shares that can be bought back is 46.83 million, equating to a maximum cost of RM22.48 million (based on a 5-day weighted average price of RM0.48 per share).
• Shares bought back may be cancelled, held as treasury shares, resold, transferred for employee schemes, or used for other purposes as allowed under the Companies Act 2016.
• While held as treasury shares, these shares have no voting, dividend, or distribution rights, and are excluded from shareholding calculations.
• Regulatory safeguards include purchase price restrictions (not more than 15% above the 5-day average), and resale restrictions (not less than average price, except with a discount under certain conditions).

Potential Impact and Price Sensitivity

• Advantages:
  • Potential to enhance EPS due to reduced share base.
  • Stabilizes share price and supply-demand dynamics.
  • Provides flexibility to reward shareholders (e.g., via share dividends).
• Disadvantages:
  • Reduces available financial resources and could limit future investment opportunities.
  • May reduce funds available for dividend distribution in the immediate future.
• If the buy-back is executed in full and shares are cancelled, the total issued shares will reduce from 672 million to 604.8 million, potentially increasing major shareholder TCC’s stake from 40.49% to 43.62%. This could trigger a mandatory takeover offer if TCC’s stake rises by more than 2% in six months, subject to waiver conditions.
• Public shareholding spread would reduce from 44.05% to 39.71%, but remains above the 25% regulatory minimum.
• No directors or major shareholders have a direct or indirect interest in the proposed buy-back.

2. Proposed Shareholders’ Mandate for Recurrent Related Party Transactions (RRPTs)

Key Highlights

• The Board seeks to renew and expand mandates allowing TCMH and its subsidiaries to enter into RRPTs with specified related parties, including Auto Dunia, Tan Chong International Limited (TCIL) Group, Warisan TC Holdings Berhad (WTCH) Group, and APM Automotive Holdings Berhad (APM) Group.
• All RRPTs are required to be conducted at arm’s length, on normal commercial terms not more favourable to related parties than to the public, and not detrimental to minority shareholders.
• Extensive details are provided on the nature, value, and parties involved in each RRPT, including:
  • Auto Dunia: Sales and purchase of motor vehicles, spare parts, rental of premises, insurance agency services. Estimated value for the next mandate: RM270.48 million.
  • TCIL Group: Sale of spare parts, vehicles, employment agency services, purchase of automotive components, car rental, and leasing. Estimated value: RM57.73 million.
  • WTCH Group: Sale and leasing of vehicles, agency services, insurance, administrative services, assembly services, and rental income. Expenses include purchase of goods, services, and rental. Estimated value: RM312.87 million.
  • APM Group: Sale and leasing of vehicles, after-sales services, administrative services, contract assembly, purchase of components, rental income/expenses. Estimated value: RM82 million.
• Outstanding RRPT receivables as at 31 March 2026 total RM121.83 million, with the majority (RM50.45 million) overdue for less than one year. The Group does not see a recoverability issue due to long-standing relationships and ongoing payments.
• Strict procedures are in place for price determination and approval, including the use of at least three independent quotations, benchmarking against industry norms, and periodic audit and review by the Audit Committee.
• Interested Directors and Major Shareholders will abstain from voting on the respective resolutions, and procedures are in place to ensure fairness and compliance.

Potential Impact and Price Sensitivity

• Significant quantum: The total value of RRPTs is substantial (hundreds of millions of RM), reflecting a large portion of TCMH’s business flows with related parties.
• Governance focus: Extensive controls are highlighted to ensure RRPTs are not more favourable to related parties, which is crucial to minority shareholders and market confidence.
• RRPTs with major related parties (e.g., TCC, Dato’ Tan Heng Chew, Tan Eng Soon) reflect continued integration of business functions within the broader Tan Chong group, which may be scrutinized by the market for potential conflicts of interest, though the company describes robust mitigation measures.
• Financial risk: The high level of overdue RRPT receivables (RM121.83 million) may be of concern to investors, though the company asserts these are being progressively recovered and are not impaired.
• Continued business relationships: The mandates support long-term relationships, which are cited as contributing to higher sales volumes, production efficiency, and bargaining power.
• Price-sensitive events: Any material change in the volume, terms, or recoverability of these RRPTs could impact reported earnings and financial position.

3. Other Notable Matters

Material Contracts and Litigation

• Several distribution, technical assistance, and assembly agreements with international automotive partners (e.g., Weichai Torch Technology, Xiamen King Long, SAIC GM Wuling, DongFeng Automobile) have been entered into since mid-2024, which may impact TCMH’s product offerings and market expansion.
• TCMH is pursuing a material litigation against several debtors for a sum of RM26.15 million plus interest, after a series of lease and maintenance payment defaults, settlement failures, and a concluded legal process up to the Federal Court. The outcome of the summary judgement application (hearing fixed on 6 May 2026) could impact the Group’s financial position and cash flow.

4. Shareholder Actions and Voting

• Shareholders are encouraged to review the detailed circular, consider the impact of the proposals, and participate (in person or by proxy) in the AGM on 12 June 2026 to vote on the resolutions.
• Proxy forms must be submitted by 10.30 a.m. on 10 June 2026.

Conclusion

The proposed resolutions on share buy-back and RRPTs are significant and could affect TCMH’s share capital, earnings per share, governance structure, and risk profile. Investors should closely monitor the AGM outcomes, ongoing litigation, and the company’s execution of its mandates in the coming year. Any substantial change in related party transaction volume, regulatory compliance, or litigation outcome could be price-sensitive and impact the share value.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy, hold, or sell shares in Tan Chong Motor Holdings Berhad. Investors are advised to review the official documents, consult professional advisors, and consider their own circumstances before making investment decisions. The accuracy and completeness of this summary are based on information provided in the company’s circular as at 30 April 2026.

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