Should Minority Shareholders Accept the SCR at RM2.55?

Based on the proposed Scheme of Arrangement (SCR), the majority shareholder intends to buy out the minority shareholders’ 25.5% stake at RM2.55 per share.

The key question is: Is RM2.55 a fair price when TONGHER has an NTA of RM3.43 per share?

Based on TONGHER’s Q1 2026 financial report, the company had approximately:

Cash: RM163 million

Debt: RM10 million

Net cash: approximately RM153 million

The proposed acquisition of approximately 39.14 million minority shares at RM2.55 would require around RM99.8 million.

In other words, TONGHER appears to have sufficient cash to fund the entire SCR. After using approximately RM100 million, there could still be around RM53 million of net cash remaining.

This raises several interesting questions for minority shareholders.

The role of the three value investors

The SCR may also depend on several sophisticated Malaysian value investors who collectively hold more than 10% of the minority shareholding:

1. Dr Neoh Soon Kean

Founder of Dynasquest Sdn Bhd, a relatively low-profile value investor who was reported by The Edge Malaysia in 2017 to have achieved a 15.5% annualised return over 37 years.

His family investment vehicle, Neoh Choo Ee & Company Sdn Bhd, holds approximately 5.13% of the minority shares, while Dynasquest holds another 0.56%.

2. Tan Teng Boo

Founder of Capital Dynamics and frequently described in the Malaysian media as the “Warren Buffett of Malaysia”.

The listed closed-end fund iCapital managed by him holds approximately 4.82% of the minority shares.

3. Chang Mun Kee

Founder of JobStreet and currently a major shareholder of JcbNEXT Bhd. JcbNEXT's 2025 annual report indicates a focus on investing in value and dividend-paying companies.

Little Rain Assets Limited, an investment vehicle associated with the Chang family, holds approximately 1.35% of the minority shares.

Together, these three investors represent a meaningful block of minority shareholders.

So why are they still holding?

This is perhaps the most interesting question.

If TONGHER is fundamentally worth only RM2.55 per share, why would experienced value investors continue to hold their positions despite the company's relatively weak share-price performance over the past two years?

Could they be seeing something that the market is missing?

There are also several questions that minority shareholders should consider:

1. Why has the share price underperformed despite TONGHER having substantial net cash and an NTA of RM3.43?

Is the market correctly pricing the business, or is there a significant valuation gap?

2. Why did the dividend decline after 2022?

Was the reduction simply due to the company's capital requirements, or has cash been accumulating in preparation for the proposed SCR?

3. If TONGHER has sufficient cash to fund the SCR, why is the company using its own cash rather than the majority shareholder funding the acquisition personally?

This is particularly important because the economic outcome can be very different depending on who funds the transaction.

If the majority shareholder is effectively using TONGHER's balance-sheet cash to acquire the minority shares, minority shareholders should ask whether RM2.55 adequately reflects the value of the cash and other assets they are being asked to surrender.

The key issue is not simply RM2.55 vs RM3.43

The NTA of RM3.43 does not automatically mean that the shares are worth RM3.43. NTA can include assets that are difficult to monetise or businesses that deserve to trade below book value.

But equally, RM2.55 should not automatically be regarded as fair simply because it represents a premium to the prevailing market price.