Vortex Consolidated Bhd executive director Chan Swee Ying has a 17.18 per cent stake.
KUALA LUMPUR: Is there a boardroom tussle at loss-making Vortex Consolidated Bhd, which is majority-controlled by individual insiders?
Things are heating up in Vortex with some of the board of directors gradually raising their stake in the company to take control.
Bursa Malaysia’s ACE Market-listed Vortex, formerly SKH Consortium Bhd, is an information technology, construction and property development company.
Its executive director Chan Swee Ying is currently the second largest shareholder, with a 17.18 per cent stake.
According to filings with Bursa, the largest shareholder is Datuk Neoh Soo Keat with a 17.33 per cent stake.
Master Knowledge Sdn Bhd is the third largest with 13.49 per cent.
Master Knowledge is controlled by Choo Peng Hung, who is managing director and executive director of Vortex.
Several private companies collectively have a strategic interest of 18.6 per cent.
The shareholders have been diluting their shares in the past year, with total shares outstanding growing by 36.2 per cent.
"I believe the fight for board control in Vortex is real," said a source close to the company.
"Neoh has been looking to list his company, Trinity Group, since 2015. He is keen on a backdoor listing and may be eyeing Vortex, which has RM52.83 million in cash, as a potential," said the source.
There is speculation that Chan also wanted to take control of Vortex, either via MMag Holdings Bhd, or MSCM Holdings Bhd.
Chan is an independent non-executive director of MMAG, an ICT solutions provider, which is the single largest shareholder of MSCM with ownership of 30 per cent as at March 1 this year.
"Chan is believed to be still holding substantial ICPS (irredeemable convertible preference shares issued in 2019) in Vortex which she can convert, even at a loss, to gain control of the company. Neoh on the other hand, still has to buy a lot of shares if he wants to use Vortex as a vehicle for his Trinity listing.
"Both Chan and Neoh see long-term potential upside in Vortex. The company is currently unprofitable and it is trying to bring in new business to mitigate the losses incurred from its existing divisions," said the source.
In a January 6 filing to Bursa, Vortex confirmed that it was in talks to buy a stockbroking firm, but has yet to enter into any definitive agreements.
Vortex is reportedly in talks to buy one of the last standalone stockbroking firms. Among the remaining ones are PM Securities Sdn Bhd and SJ Securities Sdn Bhd.
In the third quarter of FY2019, Vortex achieved higher revenue of RM42.1 million versus RM40.63 million in the same period in FY2018.
This was mainly due to the increase in revenue in IT and ICT, as well as from its property development and property investment divisions.
The property development division posted an increase in revenue mainly due to progress billings from The Louvre, its RM341 million mixed development in Kajang.
Despite higher revenue, the group's net loss increased to RM1.9 million in the period under review, from RM465,000 in the third quarter of 2018. This was mainly because of interest expenses incurred on the term loans.
"Vortex has short term assets worth about RM200 million, which exceeds its short term liabilities of RM78 million. It has sufficient cash runway for over three years, to help it grow," said the source.
As of December 31 2019, Vortex had RM48.98 million of cash and cash equivalents comprising cash and cash balances of RM13.95 million and short-terms investment of RM35 million.
The company recently sold its semi-detached factory in Shah Alam for RM10.6 million.
It gained RM1.8 million from the disposal, which is 22 per cent return on the investment.
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