ETA Group Berhad Announces Major Shareholder Proposals Ahead of 32nd AGM

Introduction

ETA Group Berhad (formerly known as Rex Industry Berhad) has issued a detailed Circular/Statement to shareholders, outlining two significant proposals to be tabled as Special Business at its upcoming 32nd Annual General Meeting (AGM). These proposals have potential implications for the company’s operations, governance, and share value, and are crucial for investors and shareholders to understand.

Key Proposals

1. Proposed New Shareholders’ Mandate for Recurrent Related Party Transactions (RRPT) of a Revenue or Trading Nature
2. Proposed Share Buy-Back Authority for Purchase of Up to 10% of Issued Shares

1. Proposed New Shareholders’ Mandate for RRPT

• ETA Group seeks shareholder approval for a new mandate to conduct recurrent related party transactions (RRPT) necessary for day-to-day operations.
• The RRPT involves significant transactions with related parties, including major shareholders and directors, with estimated values reaching up to RM70 million for construction-related services, RM50 million for trading of building materials, RM4 million for transportation and warehouse management, and RM12 million for trading of canned food and confectionery products.
• The mandate is intended to streamline business operations, reduce administrative burden, and ensure timely execution of routine transactions without the need for repeated shareholder meetings.
• Strict review procedures are in place, including oversight by the Audit and Risk Management Committee (ARMC) to ensure transactions are conducted at arm’s length and are not detrimental to minority shareholders.
• Disclosure obligations include reporting RRPT values and related parties in the annual report, and immediate Bursa Malaysia announcements if actual RRPT values exceed estimates by 10% or more.
• Interested directors and major shareholders, including Lim Chin Hui and Darmendran Kunaretnam, will abstain from voting, and are required to ensure connected persons also abstain.
• Outstanding amounts from previous intra-group transactions are being actively managed, with assurances of recoverability and no material risk to the company.

Implications for Shareholders

• Potential Price Sensitivity: The RRPT mandate involves large-scale transactions with related parties, which could affect perceptions of corporate governance and transparency. Any deviation from expected norms or issues in recoverability could be price sensitive.
• Efficiency and Governance: The mandate is intended to increase operational efficiency, but shareholders must monitor disclosures and ensure rigorous oversight to prevent abuse or conflicts of interest.
• No direct impact on share capital, earnings, or gearing expected for FYE 31 December 2026, as these are recurring operational transactions.

2. Proposed Share Buy-Back Authority

• ETA Group proposes to renew the authority to buy back up to 10% of its issued shares through Bursa Malaysia, either to cancel these shares or hold them as treasury shares.
• As of the latest practicable date, the company’s issued shares stand at 657,670,581, with the buy-back limit set at approximately 65.77 million shares. If all outstanding warrants are exercised, the limit rises to 71.25 million shares.
• The buy-back can be funded from retained profits, internally generated funds, or external borrowings. However, ETA Group currently has an accumulated loss of RM37 million, which may limit its buy-back capacity until profitability improves.
• Purchased shares can be cancelled, retained as treasury shares, resold, distributed as dividends, or used as consideration for acquisitions or employee share schemes.
• Buy-back price is capped at 15% above the five-day volume weighted average market price, and resale of treasury shares is subject to pricing rules and timing restrictions.
• Public shareholding spread: ETA Group must maintain a minimum 25% public shareholding spread after buy-back. Current spread is 44.96%, and after full buy-back, it would be 49.95%, comfortably above the threshold.
• No current treasury shares held or buy-back activity in the past 12 months.
• Potential for share price movement: Share buy-backs can support share price stability, reward shareholders via dividends, and potentially increase earnings per share by reducing float. However, it reduces available cash for dividends and investments.
• Takeover Rules: Buy-back may increase the percentage shareholding of substantial shareholders, but the Board has committed not to trigger mandatory takeover offers.
• Effects: Buy-back could affect net assets, earnings, working capital, and dividend policy depending on purchase price, funding method, and treatment of purchased shares.
• Directors’ Recommendation: The Board (including Chairman Hong Kok Cheong) recommends shareholders vote in favour of the proposal, considering the potential benefits and safeguards in place.

Implications for Shareholders

• Potential Price Sensitivity: Any buy-back activity, especially if conducted aggressively or funded by borrowings, can influence share price and investor sentiment. It may also be seen as a signal of undervaluation or confidence in future performance.
• Shareholding Structure: Buy-back increases the relative percentage ownership of major shareholders, potentially affecting control dynamics.
• Dividend and Investment Policy: Shareholders should note the impact on dividend policy and future investment capacity, as buy-backs reduce available cash.
• Market Transparency: The company commits to immediate announcements for buy-back and resale activity, supporting transparency.

Other Notable Information

• No Material Litigation, Claims, or Commitments: As at the latest practicable date, ETA Group has no material litigation, claims, arbitration, or commitments likely to affect its financial position.
• Material Contract: The only notable contract is a RM40 million conditional share sale agreement completed in December 2025 for disposal of Rex Canning Co. Sdn. Bhd. and Rex Trading Sdn. Bhd. to Director Darmendran Kunaretnam.
• Contingent Liabilities: Corporate guarantees totaling RM9.8 million for credit facilities granted to subsidiaries.
• Documents Available for Inspection: Shareholders may inspect key documents at the registered office prior to the AGM.

Conclusion

These proposals reflect ETA Group’s commitment to operational efficiency, governance, and shareholder value. The RRPT mandate and share buy-back authority are standard for listed companies but involve substantial sums and related party oversight, which may be price sensitive and merit close attention from investors. Shareholders are advised to review the details carefully and monitor subsequent disclosures for any material developments.

AGM Details

• Date: Friday, 22 May 2026, 10:30 a.m. (immediately after the 31st AGM)
• Venue: Kuala Lumpur Golf & Country Club, Bukit Kiara, Kuala Lumpur
• Proxy Forms Deadline: Wednesday, 20 May 2026, 10:30 a.m.
• Annual Report & Proxy Forms: Available at www.etagroup.my

Disclaimer

The information contained in this article is derived from official company documents and is intended for informational purposes only. It does not constitute financial advice or a recommendation to buy, sell, or hold any security. Investors should consult their professional advisers and conduct their own due diligence before making any investment decisions. The author and publisher accept no liability for any losses arising from reliance on the information provided herein.

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