Boustead Heavy Industries Corporation Berhad (BHIC): Detailed Report on the Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions (RRPTs)

Key Points for Investors

• Proposed Renewal of Shareholders’ Mandate: BHIC is seeking shareholder approval at its 54th Annual General Meeting (AGM) on 24 June 2026 for the renewal of the mandate to enter into recurrent related party transactions of a revenue or trading nature.
• Scope of the Mandate: The mandate covers transactions between BHIC and its subsidiaries with major shareholders, directors, and their connected persons, specifically with Boustead Holdings Berhad (BHB), Lembaga Tabung Angkatan Tentera (LTAT), and several wholly owned subsidiaries of BHB (including MHS Aviation, Boustead Group Risk Solution, Boustead Technology, Boustead Realty, Boustead Travel Services, and Boustead Credit).
• Nature and Value of RRPTs: The transactions include provision of training, management, rental, travel, hire purchase, insurance, IT, and MRO services. Estimated values for 2026 range from RM28,000 to RM5,000,000 per transaction type.
• Governance and Safeguards: BHIC has established stringent guidelines for RRPTs, requiring arm’s length pricing, commercial terms not more favorable to related parties than the public, and comprehensive internal audit and Board Audit Committee reviews. Directors and major shareholders with interests must abstain from voting.
• Transparency: All RRPTs will be disclosed in the Integrated Report annually, with specifics on transaction types, values, and parties involved.
• Material Contracts and Corporate Actions: The circular highlights several recent and ongoing corporate actions, including:
  • Disposal of 27,000,001 shares in Boustead Naval Shipyard Sdn Bhd for RM1.00, completed on 10 May 2024 after settlement of RM384.43 million in intercompany trade receivables.
  • Disposal of 51% equity in Contraves Advanced Devices Sdn Bhd for RM54 million, completed on 26 December 2024.
  • Pending disposal of three parcels of industrial land in Penang for RM28 million, with completion expected by Q3 2027.
• Financial Impact: The Proposal is not expected to materially affect BHIC’s share capital, earnings, or net tangible assets for the financial year ending 31 December 2026.
• Shareholder and Director Interests: BHB (72.38% shareholding) and LTAT (deemed interest via BHB) are interested major shareholders. Several directors (Dato’ Indera Ir. Dr. Hj. Ahmad Sabirin Arshad, Fahmy Ismail, Ahmad Farouk Mohamed) are deemed interested and will abstain from voting.
• Rationale: The RRPT mandate facilitates efficient operations by enabling quick execution of recurring, time-sensitive transactions without the need for repeated shareholder approvals, thus reducing administrative costs and delays.

Important Information for Shareholders

• Voting and Participation: Shareholders are advised to vote on the proposal at the AGM. If unable to attend, proxies can be appointed (including online submission via Vistra or TIIH portals).
• Price Sensitive Issues:
  • The completion of large asset disposals (Boustead Naval Shipyard, Contraves Advanced Devices, Penang land) may significantly affect BHIC’s financial position and future strategy.
  • The RRPTs involve substantial annual values and are critical to BHIC’s day-to-day operations, potentially impacting revenue generation and profitability.
  • LTAT and BHB’s continued dominance as major shareholders may influence corporate governance and future strategic decisions, which investors should monitor for any changes in management or ownership structure.
  • No material litigation or arbitration is pending, supporting BHIC’s stable operational outlook.
• Risk and Safeguards: The company has robust procedures to ensure RRPTs are conducted fairly, with oversight from internal audit and the Board Audit Committee. Any non-compliance or adverse findings may trigger a fresh shareholders’ mandate or require disclosure to Bursa Malaysia.
• Market Implications: The renewal of the RRPT mandate and the completion of significant asset disposals may signal a realignment of BHIC’s asset base and operational focus. Investors should consider the potential for new growth initiatives, changes in core business activities, or possible reinvestment of disposal proceeds.

Detailed Summary of RRPTs and Related Parties

Recent and Upcoming Corporate Actions

• Boustead Naval Shipyard Disposal: Completed for RM1.00, with trade receivables settlement of RM384.43 million finalized. May indicate strategic repositioning.
• Contraves Advanced Devices Disposal: 51% stake sold for RM54 million cash, completed in December 2024. May improve liquidity and sharpen BHIC’s focus.
• Penang Industrial Land Disposal: RM28 million transaction pending, targeted for Q3 2027 completion. Potential to unlock asset value.

Financial Effects and Outlook

The RRPT proposal is not expected to have a material impact on BHIC’s issued share capital, earnings, or net tangible assets for the current financial year. However, the asset disposals and continued RRPTs may influence future financial statements, cash flow, and operational flexibility. Investors should monitor subsequent announcements for updates on reinvestment plans, new business ventures, or changes in dividend policy.

Shareholder Actions and Recommendations

• Attend and Vote: Shareholders should attend the AGM or submit proxy forms to vote on the RRPT mandate, as it is central to BHIC’s operational continuity.
• Monitor Corporate Developments: Keep abreast of completed and pending asset disposals, changes in major shareholding, and future RRPT disclosures for potential impacts on share value.
• Review Integrated Report: Detailed disclosures on RRPTs and financial effects will be available in BHIC’s Integrated Report.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should refer to official company documents, seek independent professional advice, and assess their own risk tolerance before making investment decisions. The information herein is based on the latest available disclosures and may be subject to change following further corporate actions or market developments.

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