Accrelist and Jubilee: Relationships and Disclosures Raise Concerns

By Mak Yuen Teen

SGX-listed Accrelist Ltd and Jubilee Industries, together with Bursa-listed EG Industries, recently announced a series of proposed transactions which caught my interest, partly because in the report on Catalist sponsors that I am currently writing up, we found that RHT Communications and Investor Relations Pte Ltd is the outsourced IR firm for both Accrelist and Jubilee, and RHT Capital is the continuing sponsor of both companies which are listed on Catalist. [The report looks at non-sponsor activities and relationships especially for the major sponsors, and RHT Capital happens to be one of them].

As both RHT firms are part of the RHT Group, there is a clear conflict in my opinion. As the continuing sponsor, RHT Capital is supposed to oversee the companies&rsquo compliance with Catalist rules and review its announcements, while as the outsourced IR firm, RHT Communications and Investor Relations, would be helping to prepare their announcements.

The recent series of transactions is not straightforward and I am still looking into them to try to understand their rationale and impact on shareholders of the three companies.

Mr Terence Tea is executive chairman and managing director of Accrelist, non-executive chairman of Jubilee and executive chairman of EG. He directly owns 22.75% of Accrelist, 0.068% of Jubilee and 3.39% of EG (where he also holds 7.66% of the warrants and 5.77% of the redeemable convertible preference shares). Before the proposed transactions, Accrelist owns 65.82% of Jubilee and 5.21% of EG, while Jubilee owns 13.77% in EG.

Part of this series of transactions involves Accrelist disposing of 17.5% of its 65.82% stake in Jubilee to EG Industries at a loss of about $0.5 million over the book value of the shares (with the remaining 48.32% stake to be distributed in specie to Accrelist shareholders). Another part involves Jubilee Industries disposing its 13.77% stake in EG to Mr Terence Tea at a loss of about $6 million over the book value of the shares.

In the announcement by Accrelist on December 24, 2019, para 1.3 on page 2 said that &ldquo EG Industries Berhad (&ldquo EG Industries&rdquo ) is listed on the Second Board of the Bursa Malaysia Exchange on 27 September 1993&hellip &rdquo . Para 2.1 on page 1 of Jubilee&rsquo s announcement that same day also stated that &ldquo EG Industries is listed on the Second Board of the Bursa Malaysia Exchange (&ldquo Bursa Malaysia&rdquo ) on 27 September 1993&hellip &rdquo

EG Industries transferred from the Second Board to the Main Market of Bursa sometime between FY2008 and FY2009 based on checks of past annual reports (although no announcement of that transfer has been found). It is currently listed on the Main Market, not the Second Board, of Bursa. By stating that it was listed on the Second Board back in 1993 (which is hardly relevant for the current transactions) and omitting to state that it is currently listed on the Main Market, shareholders of Jubilee may be led to believe that the company is selling a stake in a company listed on the second board (which is arguably of lower quality) rather than the main board to Mr Tea.

Did the boards of Accrelist and Jubilee review the announcements? Are they not aware that EG Industries has been listed on the Main Market of Bursa for at least 10 years? What about the IR firm, RHT Communications and Investor Relations, and the continuing sponsor, RHT Capital?