Lim Hui Jie Published on Fri, Jun 04, 2021 / 7:00 AM GMT+8

For most companies, AGMs are typically uneventful affairs where all the resolutions put forth by the directors are approved with no hiccups while the highlight of the day for retail shareholders is finding out what’s in their free lunch boxes.

Therefore, nothing could describe the shock and dismay felt by the long-serving board of Ntegrator International, a communications network specialist and e-business systems integrator, when they found themselves unceremoniously booted out at the April 28 AGM by a substantial shareholder, Christian Kwok-Leun Yau Heilesen, who had emerged barely days earlier, in what could be seen as a “Pearl Harbor moment” — a sudden move with little warning.

Based on earlier reports, Heilesen is a Danish national who is the CEO of Hong Kong-based mobile content developer Funmobile. Since the takeover of Ntegrator, he has increased his stake in Ntegrator to 15.37% as at May 21.

Right after clearing out the board, Heilesen sent an EGM requisition notice to appoint five new directors. Heilesen wanted to appoint himself as executive director and Jacob Leung Kwok Kuen as non-executive chairman. Two others, Stanley Leung Yu Tung and Eunice Veon Koh Pei Lee were to be elected independent directors while Zhou Jia Lin was to be elected as a non-executive, non-independent director.

On May 20, Koh withdrew her nomination, and at an EGM on May 21, the four were confirmed as directors. These five individuals share something in common — they also sit on the board of another SGX-listed company, Incredible Holdings.

The following day, Ntegrator announced that a new board of five had been formed. Besides Heilesen and the three others he had brought in, the new board also included Han Meng Siew, Ntegrator’s former executive chairman.

Under the Companies Act, a company director cannot resign or vacate his office unless there remains in the company at least one director who is ordinarily resident in Singapore, and any resignation or vacation of office in breach of the foregoing will be deemed invalid. Given how the rest of the new directors are based in Hong Kong, it is no wonder Han is staying put for now.

Board concerns

Apparently, the emergence of Heilesen took Ntegrator’s old board by surprise. As described in its response to queries from the Singapore Exchange, the old board said that due to a “technical problem”, notifications sent by Mission Well on April 21 and 22 were not redirected to the right inbox. The old board belatedly found out from emails retrieved from its back-up server that Mission Well had on April 19 increased its stake from 4.96% to 6.09% and by April 21, increased it further to 8.51%.

Ntegrator’s share price hit a recent peak of 1.9 cents on April 28 — the day of the AGM. But since then, the stock has dipped, despite Mission Well’s continuous buying, to close at 1.4 cents on May 31. At this level, the company is valued at $18.01 million.

Ntegrator’s old board did not go quietly after the ouster. On May 21, just before the takeover was completed, the company’s sponsor, Asian Corporate Advisors and the former board noted that then-incoming director Jacob Leung was a former chairman of Industronics, a Bursa Malaysia listed company.

Back in October 2019, Malaysia’s bourse reprimanded Jacob Leung and four other Industronics directors for failing to ensure transactions it undertook for a proposed share subscription in Singapore-listed Vashion Group (the old name of Incredible Holdings) in 2014 would not be detrimental to the company and its shareholders. Besides the public reprimand, Leung was fined RM200,000 for breach of Bursa’s listing rules.

The old Ntegrator board had also expressed its concern over Heilesen’s and Jacob Leung’s ability to devote sufficient time and resources to the company, given their multiple commitments, including their directorships at Incredible Holdings.

Despite this, the new board of Ntegrator assessed that Jacob Leung was suitable to take up his director’s position in Ntegrator, noting that the Bursa fine and reprimand was not a conviction and did not disqualify him from being a director at Malaysian companies.

In an interview with The Edge Singapore, Heilesen said the public reprimand from Bursa was disclosed by Jacob Leung and was not hidden from the board or the company.

The developments at Ntegrator had caught the attention of SGX. Between April 27 and May 24, SGX RegCo fired numerous questions at Ntegrator. The queries, which increased in intensity, centred around the following issues: Whether the new directors, given their multiple appointments, have enough time to fulfil their new obligations at Ntegrator and whether there “were/are transactions/ proposed transactions” between Ntegrator and Incredible Holdings.

Specifically, the new nominating committee was asked to justify if Jacob Leung, given his previous experience with Bursa, was suitable to take this new role. The new Ntegrator board was also asked if another new director, Stanley Leung, can handle his new role, given how he is currently the financial controller of Hong Kong company Wewesat and also holds directorships at Hong Kong-listed Echo International Holdings Group; TT Automobile Company and Incredible Holdings. Finally, SGX RegCo asked if Heilesen could cope with his new appointment as sole executive director of both Ntegrator and Incredible Holdings.

Moving forward

Speaking from Hong Kong in an interview on May 25, Heilesen explained he took over Ntegrator because it was a “good” company. He holds the view that Covid-19 has helped uncover many promising companies that are undervalued but impacted by the pandemic presently.

He believes that the market is ripe for many M&A offerings across all industries that were previously on “unrealistic valuations”. Heilesen notes Ntegrator has an order book of $65.9 million and cash and cash equivalents of $8.3 million as at Dec 31, 2020. And while its total debt was $15.7 million, trade receivables of some $19.7 million were potentially “fully recoverable”, he adds.

Furthermore, Heilesen thinks the company’s gross profit remains respectably healthy, which means if he can reduce general expenses, he can hopefully turn in a profit in the near future based on the existing order book.

However, he acknowledges it is still early days and that he is still familiarising himself with the business. “We need to look at everything in the company, go through what business it is actually doing. [Right now], all you know, I know, are from the annual report.”

Heilesen says he does have definite plans for the company, but as the takeover is still fresh, the team needs to do its due diligence and start an internal restructuring process. While he did not give details, he says this will have to be done “before we can do something suitable like injecting new assets into Ntegrator to grow it further.”

To kickstart this effort, Ntegrator is shoring up its balance sheet. On May 25, it announced a conditional placement agreement with one Zhou Qilin, an individual from China described as “an active investor” of companies in Hong Kong and Singapore, where, among other stakes, is her 6.94% ownership of Incredible Holdings.

Qilin was introduced to Ntegrator by Bluemount Capital, a wholly-owned subsidiary of Bluemount Financial Group, which is 30% held by Stanley Leung, who has been flagged in SGX’s query for holding directorships at Ntegrator, Incredible Holdings, as well as Echo International Holdings, which provides manufacturing services.

As part of the agreement, Qilin will pay almost $2.06 million to subscribe to 187.86 million new Ntegrator shares at 1.094 cents each, which is priced at a 9.96% discount off the weighted average price of trades done on May 21. When completed, the placement will increase the total number of shares in the company from about 1.06 billion to 1.25 billion shares.

The placement will see Qilin own 14.99% in the enlarged share base of the company, making her the single largest shareholder when the placement is complete. Heilesen, meanwhile, will see his stake diluted from 15.37% to 13.07%, although he will remain the second- largest shareholder by a wide margin.

According to Ntegrator, 80% of the proceeds will be used to fund acquisitions and new business opportunities with the remainder as working capital.

On June 1, Ntegrator announced the acquisition of an entity held by Heilesen called Fund Joy for HK$1, following “arms’ length negotiations” on “a willing seller and willing buyer basis” that also took into consideration the NTA of Fund Joy.

“No valuation was conducted in relation to the proposed acquisition. The proposed acquisition does not result in any goodwill,” states Ntegrator. Conditions attached to this acquisition, which is meant to help Ntegrator expand its business into Hong Kong, includes delivering the audited accounts of Fund Joy within seven working days as requested.

For now, Heilesen’s sudden takeover may have been his Pearl Harbor but only time will tell if he has awakened the sleeping giant of Singapore investors to take interest in his two companies. 

Sidebar: Incredible Holdings chalks up five years of losses

Even as he planned and executed the takeover of Ntegrator, Heilesen was, and still is, the executive director of Incredible Holdings, which comprises two main business segments.

The company handles the distribution of chemical products and consumable materials for the electronics industry here, as well as the trading of luxury goods in Hong Kong. In 2020, it completed the disposal of its switchgear design and assembly services business.

Asked if there were any plans to integrate Ntegrator and Incredible, Heilesen says there are no plans to do so as the two companies are very “different businesses” and Ntegrator is simply an investment he made. Heilesen also did confirm to SGX RegCo that he will be able to act as executive directors for both companies.

Market observers are probably wondering if Heilesen should try and turn around Incredible before taking control of another listed company.

For the past five years, Incredible has been making losses. For the FY2020 ended Dec 31, 2020, losses widened to $4.1 million from $2.3 million in FY2019 and $1.9 million in FY2018. It was in FY2018 that the company expanded into the luxury goods business, specifically, the wholesale of luxury watches and watches in general. However, the new business still left the company in the red.

Revenue from the luxury business fell to $6.77 million in FY2019 from $8.28 million in FY2018, before plunging to $1.64 million in FY2020 as the pandemic hit the luxury business hard.

According to Heilesen, Incredible is still in the process of turning around the business. He says that the trading of luxury goods had been Incredible’s key revenue driver since FY2018 compared to revenue contribution from the distribution of consumable material for the electronics industry and switchgear assembly.

Despite the losses, Incredible has negligible debt and enjoys a positive cash position, holding $839,000 in cash and cash equivalents. Incredible’s share price stood at 0.5 cent at May 31, valuing the company at $7.48 million or 2.73 times book value.