Sinaran Advance Group Berhad Proposes Capital Reduction of Up to RM33.6 Million

Key Points from the Sinaran Advance Group Berhad Circular

• Proposed Capital Reduction: Sinaran Advance Group Berhad (“SAG” or “the Company”) has proposed a reduction of up to RM33.6 million from its issued share capital pursuant to Section 117 of the Companies Act 2016. The reduction will cancel share capital that is “lost and unrepresented by available assets.” The credit generated from this cancellation will be used to set off the Company’s accumulated losses.
• Rationale: The Company’s Board states that the proposal will “rationalise their financial positions by reducing accumulated losses,” which is anticipated to enhance credibility with bankers, customers, suppliers, and investors.
• Shareholder Approval: The proposal is subject to shareholder approval at an Extraordinary General Meeting (EGM) scheduled for 3 June 2026.
• No Impact on Share Numbers: This capital reduction will not alter the number of shares in issue, the number of warrants or ESOS Options outstanding, nor will it result in any cash outflow to shareholders.
• Background: This follows a prior capital reduction of RM68 million completed in October 2024, but further losses have accumulated, prompting this new exercise.
• Latest Financial Position: As of the latest audited accounts for FYE 2025, the company reported accumulated losses of approximately RM33.61 million.
• Financial Effects: If approved, the Company’s accumulated losses will be almost eliminated, and retained earnings will be marginally negative or turn positive, depending on scenario assumptions.
• No Court Sanction Needed: The reduction is carried out under Section 117, so High Court sanction is not required.
• Estimated Completion: The capital reduction is expected to be completed in Q3 2026.
• Directors’ Recommendation: The Board recommends shareholders vote in favour, stating it is in the best interests of the Company.

Potential Price Sensitive and Shareholder-Relevant Issues

• Balance Sheet Clean-Up: The elimination of accumulated losses may enhance the Company’s profile with stakeholders and could make future capital raising or dividend payments more feasible, which may positively impact investor sentiment and share price.
• No Dilution or Cash Payout: Shareholders should note there will be no dilution of shareholding, no reduction in the number of shares held, and no cash distribution as part of this exercise.
• Operational Refocus: After disposing of K-Star Sports Limited (KSSL) and its subsidiaries in December 2024, the Group is now focused on its core construction business. However, it remains cautious due to challenging sector conditions.
• Improved Capital Management Flexibility: With the capital reduction, management expects greater financial flexibility for future strategic initiatives, which could affect future profitability and growth prospects.
• Key Financial Metrics:
  • Revenue for FYE 2025 fell to RM10.63 million from RM19.94 million in FYE 2024, reflecting the exit from the sports footwear segment and lower construction activity.
  • Net loss after tax (LAT) for FYE 2025 was RM6.26 million, an improvement from the RM20.21 million loss in FYE 2024.
  • The Group’s net assets per share is marginal (RM0.01–RM0.05 depending on scenario), reflecting a lean balance sheet post-disposals and capital reductions.
• Outstanding Warrants and ESOS Options: As at the latest practicable date, there are 457,480,739 outstanding warrants (exercise price RM0.12, expiry April 2027) and 21,644,000 ESOS Options (exercise price RM0.02). The capital reduction does not affect their terms.
• Extraordinary General Meeting (EGM) Details: The EGM to approve the capital reduction will be held at Lot 4.1, 4th Floor, Menara Lien Hoe, No. 8, Persiaran Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan, on 3 June 2026 at 2:00 p.m.

Summary Table: Pro Forma Effects of Capital Reduction

Historical Financial Performance

• 2022–2025 Trends:
  • Revenue fell sharply from RM56.91 million (2022) to RM10.63 million (2025), mainly due to the exit from sports footwear and reduced construction activity.
  • Net losses have been persistent, though the loss narrowed in 2025 after divesting loss-making subsidiaries and taking non-cash write-downs in 2024.
• Key Events:
  • In 2024, the Company disposed of KSSL and its China-based subsidiaries, leading to a large loss and transfer of reserves to accumulated losses.
  • Capital reduction in 2024 and the proposed 2026 capital reduction are both aimed at eliminating accumulated losses from the balance sheet.

What Should Shareholders and Investors Do?

• Attend or Vote at the EGM: Shareholders are encouraged to attend the EGM or submit their proxy forms by 1 June 2026 to participate in this key corporate exercise.
• Monitor for Further Announcements: The effective date of the capital reduction will be announced after approvals and lodgement with the Registrar of Companies.
• Understand the Non-Cash Nature: There is no cash payout or dilution, but the balance sheet “clean-up” could facilitate future dividends or capital-raising, potentially impacting future share price movements.

Conclusion

The proposed capital reduction is a significant corporate action for Sinaran Advance Group Berhad and is designed to position the Group for improved financial flexibility and enhanced credibility with stakeholders. While it does not result in immediate cash benefits for shareholders, it may lay the groundwork for future value creation and could be a catalyst for improved investor sentiment, especially if the Group’s operational turnaround continues.

Disclaimer

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should consider their own financial circumstances and/or consult with a licensed financial advisor before making any investment decisions. The information is based on official company documents and may be subject to change. No liability is accepted for any loss or damage arising from reliance on the information above.

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