This article first appeared in The Edge Malaysia Weekly on February 12, 2024 - February 18, 2024

The outcome of the last annual general meeting of Eden Inc Bhd showed an interesting pattern.

Shareholders holding about 21% equity interest in the company voted against resolutions proposed by the current management. Some resolutions such as the re-election of certain directors saw the opposing vote count go up to 33%.

Nevertheless, major shareholder Tan Sri Abdul Rahim Mohamad and friendly parties were able to get all the resolutions passed.

Last week, Eden proposed a 10% placement to raise an estimated RM7.5 million. The bulk of the money is earmarked for the upgrading of Underwater World in Langkawi, a tourist attraction and one of the largest marine and freshwater aquaria in Southeast Asia, which has 50,000 sq ft of retail space.

Eden plans to use the money raised from the placement to pay for the consultancy works related to the enhancement and upgrading of Underwater World. The cost to upgrade is estimated at almost RM69 million, which Eden plans to finance through bank borrowings and internally generated funds.

The cost to pay the consultants is less than RM6.8 million while the construction work is estimated at 10 times more. If the project is viable and will enhance Eden’s bottom line, why can’t the company seek bank borrowings to fund the entire project?

Also why do a placement when the proceeds will only be used to cover the fees for consultants? Why not conduct a fundraising exercise such as a rights issue to raise a substantial amount of money to get the project going? This would be fair to all existing shareholders who may want to take advantage of any share issuance exercise.

It  is worth noting that the second-largest shareholder of Eden is Koperasi Belia Islam Malaysia (KBIM) with 9.2% equity interest. KBIM has been increasing its stake in the company over the last few months. In September last year, it only had a 5.3% stake in Eden.

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