Iskandar Waterfront City Berhad: Key Details from Proposed Shareholders’ Mandate Circular

1. Overview of the Proposed Shareholders’ Mandate

Iskandar Waterfront City Berhad (“IWCity”) has issued a comprehensive Circular to shareholders ahead of its Fifty-Seventh Annual General Meeting (AGM), scheduled for 24 June 2026. This Circular seeks shareholder approval for the renewal of the shareholders’ mandate related to recurrent related party transactions (RRPT) of a revenue or trading nature. The RRPTs are essential for the group’s day-to-day operations and involve transactions with its major shareholders and their related entities.

2. Key Points for Investors

• Mandate Renewal: The existing mandate will lapse at the AGM unless renewed. The renewal covers numerous RRPTs, involving significant contracts and values with major shareholders and their subsidiaries.
• Transaction Scope and Estimated Value: The Circular details RRPTs with estimated annual values, including construction contracts, sale and rental of machinery, equipment, building materials, project management services, and landscaping works. Several transactions have projected values in the hundreds of millions of Ringgit, with some individual RRPTs reaching up to RM800 million.
• Related Parties: Key related parties include Knusford Berhad (KB), Kumpulan Prasarana Rakyat Johor Sdn Bhd (KPRJ), Iskandar Waterfront Holdings Sdn Bhd (IWH), and Ekovest Berhad (EB), all controlled or significantly influenced by IWCity’s major shareholders. Directors with direct or indirect interests in these parties will abstain from voting.
• Review and Control Procedures: The Group has established rigorous procedures to ensure RRPTs are conducted at arm’s length, on commercial terms not more favorable to related parties than to the public, and are not detrimental to minority shareholders. The Audit Committee will review these transactions and the effectiveness of internal controls annually.
• Litigation Updates: The Circular highlights ongoing material litigation, including significant claims involving Tebrau Bay Sdn Bhd (a subsidiary) and Kerajaan Malaysia, as well as a high-profile damages claim by Tenaga Nasional Berhad (TNB) related to alleged trespass and damage to submarine cables. The TNB suit’s quantum was attempted to be increased from RM76.5 million to RM133.16 million but was dismissed by the High Court; the matter is currently stayed pending appeal.
• Material Contracts: The Group entered into a conditional settlement agreement with Rampai Fokus Sdn. Bhd. (a related party) for the settlement of advances totaling RM267.83 million, to be resolved via the issuance of new redeemable preference shares in subsidiaries.

3. Important Shareholder Considerations

• Potential Price Sensitivity:
  • The RRPT values are substantial, with some contracts approaching RM1 billion. Investors should monitor the execution and profitability of these transactions, as any deviation or dispute may materially affect IWCity’s earnings and balance sheet.
  • The ongoing litigation, especially the TNB suit, represents a contingent liability. If the Group is found liable, it may face a significant outflow of resources. The attempted increase in damages by TNB, though dismissed, signals potential risk exposure well above previously anticipated levels.
  • Settlement agreements involving related parties (RM267.83 million) and the issuance of redeemable preference shares may impact the capital structure and future cash flows of the group. Investors should assess the implications for dilution and gearing.
  • Directors and major shareholders with interests in the RRPTs will abstain from voting, ensuring that minority shareholders’ interests are protected in the approval process.
• Corporate Governance:
  • The company has in place stringent review mechanisms, including independent oversight for RRPTs above RM25,000, and annual Audit Committee reviews. This provides additional assurance to shareholders regarding the fairness and transparency of related party dealings.

4. Detailed RRPT Estimates (2026-2027)

Note: Actual values may vary from estimates depending on market rates and contract awards.

5. Litigation Exposure

• Kerajaan Malaysia vs Tebrau Bay Sdn Bhd: Unpaid income taxes of RM10.8 million. The amount is fully provided in accounts; additional costs or interest may arise.
• TBSB vs Kerajaan Malaysia: TBSB sought declarations on non-taxability of RM170 million compensation for compulsory land acquisition and refund of RM26.9 million in taxes. The suit has been dismissed.
• TNB vs IWCity & Subsidiaries: TNB claims damages for alleged trespass and cable damage, initially RM76.5 million, later attempted to amend to RM133.16 million. The claim is currently a contingent liability; the matter is stayed pending appeal.

6. Material Contract: Settlement with Rampai Fokus Sdn. Bhd.

IWCity signed agreements for the settlement of outstanding advances totaling RM267.83 million with Rampai Fokus Sdn. Bhd. (a related party), to be settled via the issuance of redeemable preference shares in two subsidiaries. This transaction affects both the capital structure and financial position of the Group.

7. Director and Major Shareholder Abstentions

Directors and major shareholders with interests in the RRPTs will abstain from voting on the mandate at the AGM. They have also undertaken to ensure their connected persons abstain, safeguarding minority shareholder interests.

Investor Takeaways

• The size and scope of RRPTs (up to RM800 million per transaction) and the settlement agreement (RM267.83 million) are highly material and could affect both earnings and balance sheet structure.
• The ongoing litigation, particularly the TNB suit, represents a significant contingent risk. Investors should monitor developments, as unfavorable outcomes could materially impact IWCity’s finances.
• The AGM will be critical for shareholders to voice concerns and approve the mandate, ensuring proper governance and oversight.

Disclaimer

This article is provided for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with professional advisors before making investment decisions. The information herein is based on the company’s official Circular and may be subject to change based on future developments or disclosures.

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