Kawan Food Berhad Releases 2026 AGM Circular: Key Shareholder Mandates and Share Buy-Back Authority Details

Major Resolutions Proposed for the Forthcoming AGM

Kawan Food Berhad has issued its comprehensive Circular and Statement to shareholders in anticipation of its upcoming Twenty-Second (22^nd) Annual General Meeting (AGM), scheduled for 23 June 2026. The Circular contains significant proposals that could have material impact on the company’s strategy, governance, and potentially its share price. Key items include the renewal of mandates for recurrent related party transactions (RRPTs) and an authority for the Company to repurchase its own shares.

1. Proposed Renewal of Shareholders’ Mandates for Recurrent Related Party Transactions (RRPTs)

Background

The Company seeks shareholder approval to renew mandates for entering into RRPTs with related parties, which are transactions occurring in the ordinary course of business and are necessary for day-to-day operations. These transactions are conducted on commercial terms not more favourable to related parties than those offered to the public, ensuring fairness to minority shareholders.

Key Points and Details

• RRPTs Are Subject to Bursa Malaysia Listing Requirements: Transactions are limited to those necessary for ordinary business on arm’s length terms. If any transaction exceeds RM1 million or 1% of the percentage ratio (whichever is higher), immediate announcements are required.
• Classes of Related Parties: Major related parties involved include Shana Foods (UK), Rubicon (Canada), Hot & Roll Holdings Sdn. Bhd. (Malaysia), and MH Delight Sdn. Bhd. (Malaysia). Many of these entities are controlled or significantly influenced by Kawan directors or major shareholders and their family members.
• Transaction Values (2026/2027):
  • Shana: Estimated RM36 million in purchases (actual transacted RM13.76 million YTD 31 March 2026).
  • Rubicon: Estimated RM15 million (actual RM6.79 million).
  • Hot & Roll: Estimated RM5 million (actual RM1.76 million).
  • MH Delight: Sales to Kawan RM3.5 million (actual RM1.03 million), Purchases RM1 million (actual RM12,083).
• Credit Risk: As of 31 December 2025, RM1.87 million was owed by related parties for up to one year. By 31 March 2026, no overdue amounts were outstanding.
• Governance and Safeguards: Kawan employs rigorous procedures to ensure RRPTs are not detrimental to minority shareholders, including Audit Committee oversight, comparison with third-party transactions, and abstention from voting by interested parties.

Shareholder Impact and Price Sensitivity

• Potential Price Sensitivity: Significant volumes of RRPTs with related parties, especially if they become a substantial portion of revenue, could attract regulatory scrutiny or impact investor perception regarding governance and independence. Any material deviation from expected values may also prompt disclosures.
• Abstention and Voting: All interested directors, major shareholders, and their connected persons will abstain from voting on these mandates, ensuring an unbiased approval process.
• Disclosure: Full transaction details and values will be disclosed in the Annual Report. Exceeding estimates by more than 10% requires immediate market announcements.

2. Proposed Renewal of Authority for Share Buy-Back

Background

The Company also seeks to renew its authority to repurchase up to 10% of its issued shares on Bursa Malaysia. As of the last practicable date, Kawan’s issued shares were 364,036,612, with 25,018,900 shares already held as treasury shares. The Board seeks authority to buy back up to an additional 11,384,761 shares.

Key Details

• Share Buy-Back Mechanics: Any repurchased shares may be cancelled, retained as treasury shares, distributed as share dividends, resold, or used for other corporate purposes.
• Purchase and Resale Price Limits: Purchases are capped at 15% above the 5-day weighted average price. Resale or transfer of treasury shares must not be less than the 5-day average, or up to 5% discount if certain conditions are met.
• Financial Impact:
  • Share capital could reduce to 327,632,951 if the maximum shares are bought back and cancelled.
  • EPS is expected to improve if buy-backs are executed at favourable prices and shares are cancelled.
  • Net Assets (NA) per share may rise if buy-backs are below NA per share, but fall if above.
  • Working capital will be reduced by the amount spent on buy-backs.
  • The buy-back will be funded by retained profits (RM60.5 million as of 31 Dec 2025, RM59.7 million as of 31 Mar 2026) and/or borrowings.
• Shareholding Structure: The public shareholding spread is currently 33.16% and would reduce to 30.84% if the buy-back is executed in full. The Company will not proceed with further purchases if this would breach the Bursa Malaysia minimum public spread requirement.
• Directors and Major Shareholders: No direct interest in the buy-back except for the potential increase in their percentage holdings due to a reduction in total shares.
• Recent Buy-Back Activity: In the past 12 months, Kawan repurchased 1,003,900 shares as treasury shares, with no resale or cancellation of treasury shares in the same period.

Shareholder Impact and Price Sensitivity

• Potential Price Sensitivity: The buy-back authority, if exercised, could support the share price by reducing supply and signalling management’s confidence in undervaluation. It could also enhance EPS by reducing the share base.
• Take-Over Code: The buy-back, even if fully executed, would not trigger a mandatory takeover under the Malaysian Code on Take-Overs and Mergers for any existing shareholder.
• Dividend Policy: No direct impact on dividend payments, but the Board may choose to distribute treasury shares as dividends.

Other Notable Aspects

• Material Commitments: As of 31 March 2026, Kawan’s material commitments (approved and contracted) total RM3.46 million.
• No Material Litigation: The Company and its subsidiaries are not involved in any material litigation, claims, or arbitration.
• Subsidiary Structure: The group’s structure includes several wholly-owned subsidiaries engaged in manufacturing, trading, IT, and beverage production, both locally and overseas.

Action Required by Shareholders

• Voting: Shareholders are encouraged to review the resolutions carefully and attend the AGM on 23 June 2026 or submit proxy votes if unable to attend.
• Proxy Submission: Proxy forms must be submitted by 10:30 a.m. on 21 June 2026, either by mail or electronically.

Conclusion

The forthcoming AGM presents shareholders with critical decisions on related party transactions and capital management strategies through share buy-backs. Both proposals are likely to be price sensitive, particularly due to the scale of RRPTs and the potential impact of share buy-backs on EPS and market sentiment. Investors should monitor subsequent disclosures for any deviation in transaction values, or changes in treasury share management, as these could influence market valuation and trading dynamics.

Disclaimer: This article is a summary and interpretation of Kawan Food Berhad’s official circular and statement for investor information purposes only. It does not constitute investment advice. Investors should review the original documents, consider their own circumstances, and consult their financial advisors before making any investment or voting decisions.

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