KUALA LUMPUR: Interesting developments are unfolding at Sapura Resources Bhd with the minority shareholders having been riled up at its 67th annual general meeting on July 17.
Business Times learnt that minority shareholders were dissatisfied with the way the majority shareholders, along with the management and current board, have been handling the company's affairs.
To provide context, Sapura Resources had in July last year reportedly decided to exit the maintenance, repair and overhaul (MRO) business due to the long-drawn adverse impact of the Covid-19 pandemic on the segment.
In its announcement to Bursa Malaysia on July 12 last year, Sapura Resources had inked a non-binding conditional heads of agreement with RoyalJet LLC for the proposed disposal of its entire stake in Sapura Aero Sdn Bhd.
On July 11, 2023, it was reported that RoyalJet was planning for Asian expansion through the potential acquisition of Sapura Resources' aviation business at Sultan Abdul Aziz Shah Airport (LTSAAS) in Subang.
RoyalJet wanted to establish a presence in the Southeast Asian private aviation market, by designating LTSAAS as its regional hub for private charters and for its MRO business.
However on July 18 this year, Sapura Resources entered into an MoU with Subang MRO Sdn Bhd to form a business collaboration.
This was through the incorporation of a joint venture company to provide MRO and other aviation related services.
In December 2023, it was reported that Explorer Group Sdn Bhd and RoyalJet had signed MoU to collaborate on private flight operations based at LTSAAS.
The partnership aims to provide opportunities for RoyalJet to enter the Southeast Asian private aviation market for fixed-base operations, private charter and aircraft maintenance services.
Sources told Business Times that this would not have raised eyebrows if it was not for the fact that there appeared to be a glaring conflict of interest highlighted by minority shareholders during the recent AGM.
As shared by a minority shareholder, the board disclosed a number of questions raised by the Minority Shareholders Watchdog Group (MSWG) about the potential conflict of interest.
This was given that Datuk Shahriman Shamsuddin was a shareholder and executive director of Explorer Group, and also managing director of Sapura Resources.
Both companies are involved and/or interested in the aviation business including MRO.
The board disclosed that the potential conflict of interest had been deliberated by Sapura Resources' Board Audit and Risk Committee and all its board members.
According to the minority shareholder, it was made known that Shahriman would be relieved from all matters in relation to RoyalJet and that Sapura Resources had appointed a lawyer to seek legal advice on the matter.
However, there was no indication of the outcome of these actions apart from the fact that the board undertook conflict of interest training in January 2024.
During the AGM, a shareholder submitted a question on how Sapura Energy's aviation business would be managed given that Shahriman was relieved from all matters in relation to RoyalJet.
"The chairman replied that the business head would manage the aviation business and not the MD, Shahriman," the minority shareholder said.
Another shareholder asked whether Sapura Resources planned to proceed with the announced divestment of the aviation business or whether it was planning to grow it as suggested by the board at the AGM.
The shareholder added that the chairman had asked Shahriman to comment on the direction of the aviation business.
The situation poses a significant concern because both Sapura Resources and Explorer Group planned to be engaged in similar areas of the aviation sector.
"This would lead to a scenario where business decisions by the management could potentially be influenced by personal interests, which from a corporate governance perspective does not seem like a best practice," the shareholder said.
Business Times has reached out to Sapura Resources and Shahriman.
Meanwhile, an analyst who spoke to Business Times indicated that from a corporate governance standpoint, this isquite is surprising.
For a company sitting on RM868.9 million in total assets as of financial year 2024 (FY24), Sapura Resourced had been languishing, the analysts said.
The company had recorded consecutive years of losses since FY19 up to FY22.
In FY23, it made a profit. However, it was due to accounting gains arising from reversal of impairment and one-off gains from leases.
Its recently-concluded FY24 saw a return to a loss of RM77.40 million.
In its recently posted first quarter of FY25 results, Sapura Resources recorded an increased pre-tax loss of RM19.5 million.
Since 2015 when its share price hit a high of RM1.60, the company had fallen to 28 sen this year.
In contrast, Bursa's benchmatk FBM KLCI has only fallen from 1,672 points to 1,590 points.