For the uninitiated, E.A. Technique (M) Berhad (“EATECH”) is a financially troubled company due to their shareholder’s equity falls below 25% of the share capital of RM179.8 million back in 2022, where auditors had issued a yellow card — material uncertainty on going concern to the company, resulting to the company falling into Practice Note 17 (PN17).

Back in the days, EATECH was performing reasonably well as a marine transportation and offshore storage of oil & gas and provision of port marine services. However, the company was struck by Covid-19 in 2020, resulting in significant impairment losses in the company.

Nevertheless, we are seeing great opportunity ahead for EATECH as the company’s regularisation plan has been well accepted by shareholders, additional funds of RM79.6 million has been injected into the company, together with regularisation of creditors’ debt, which would effectively put EATECH out of the PN17 status.

There are positive surprises for shareholders of EATECH…

1. Addition of New Shareholders to the company

We had mentioned that there will be additional funds being injected to the company for the regularisation plan of EATECH. A few notably players namely Voultier Sdn Bhd (“VSB”) which was owned by Datuk Wira Mubarak (70%) and Dato’ Lai* (30%) respectively, Mr. Lim, Dato’ Sri Wong, an experienced investor in the realm of Malaysia’s capital market, and Encik Nasrul, the current CEO of EATECH.

*Dato Lai is the major shareholder of Kinergy Advancement Berhad, where the company is currently valued at RM735.0 million in market capitalisation.

Logically speaking, these experienced investors would not invest in EATECH if not for their confidence in turning EATECH around. Currently, EATECH boasts an orderbook of RM146.6 million with extension options of additional RM281.25 million.

On the other hand, VSB is expected to contribute new contracts and opportunities in the oil and gas industry. Which would enhance the prospects of EATECH going forward.

2. Deeper Understanding of Shareholders

The RM79.6 million raised shall first be utilised to repay the creditors pursuant to a Scheme of Arrangement (SOA) with the creditors of the company. For information the initial total debts owing to the creditors is approximately RM259.4 million, of which the creditors had agreed to arrive at 27.4% of the Adjudicated Debt, which is RM71.1 million.

Prior to this regularisation plan, EATECH had gone through a divestment exercise to dispose of some of their assets, and repaid RM46.0 million to the creditors, where the balance is approximately RM31.0 million. After this exercise, this will clean up the balance sheet of EATECH (likely to register a gain, which shall increase the shareholder’s equity) and pull the company out of PN17.

What’s more interesting is the payment back to Sindora Berhad (“Sindora”).

While we are hunting for the next Johor thematic stock, many had forgotten that EATECH’s major shareholders namely Sindora Berhad, Kulim Berhad (“Kulim”) and Johor Corporation, are also part of the exercise, and they are “forgiving” a major chunk of the outstanding debts of EATECH to render this exercise a success.

The Stars are Aligned.

To conclude, EATECH’s upliftment from PN17 is just a matter of time. Investors need to monitor this company closely as approximately 80.0% of the shares of the company had been controlled (if you know what I mean).