SINGAPORE (Apr 19): Datapulse Technology shareholders will decide Friday whether to keep the incumbent board and support its diversification plans, or to bring in new directors led by the dissenting shareholder Ng Bie Tjin @ Djuniarti Intan.

In an extraordinary general meeting, the shareholders will vote on the proposed removal of CEO and executive director Wilson Teng, chairman and independent non-executive director Low Beng Tin, and independent non-executive directors Rainer Teo and Thomas Ng. To replace them, the requisitionists propose appointing Intan as a non-independent director, and Ng Boon Yew, Loo Cheng Guan and Koh Wee Seng as independent directors.

An additional two resolutions relate to proposals by the incumbent board. One involves a proposal to diversify into investments and consumer business. The other is a proposed special dividend of 1 cent per share, following the sale of its Tai Seng property. With the disposal of the facility, Datapulse’s business of manufacturing media storage products is currently dormant, the company says in its earnings for 2QFY2018 ended Jan 31.

See: Datapulse Tech's two dissenting factions will come head-to-head in April 20 EGM

The past few weeks has brought in a deluge of statements from incumbents and dissenting shareholders. Nevertheless, pertinent questions remain for both sides:

Proposed directors

1. If liquidation is blocked by the controlling shareholder, what will the new board do?

Intan has announced that if appointed, the new board would carry out a feasibility study on Datapulse’s diversification. If necessary, she said they would consider a sale of the vehicle or liquidation. However, as the incumbent board pointed out, voluntary liquidation requires the passing of a special resolution, for which at least 75% of shareholders present must vote in favour. This move could be blocked by controlling shareholder Ng Siew Hong, who owns 29% of the company.

As at March 22, Datapulse has cash of $84.3 million, which notably exceeds its market cap of $76.4 million. The cash level includes $52.9 million in proceeds from the disposal of a property in Tai Seng. It has debt of $139,000, as at Jan 31.

Intan has announced intentions to propose an interim dividend of 20 cents per share, amounting to a total payout of $44 million, before June 14. Some shareholders would probably prefer for the rest of the cash to be paid out too, but what are the options on the table?

See: Datapulse board questions feasibility of proposed 20-cent interim dividend, calls it a 'self-serving ploy'

2. How was the composition of the new board decided upon?

While the background of each proposed director has been made publicly available, shareholders may want to seek more clarity on their motives for stepping forward. If Datapulse does not liquidate but has to reinvent its core business, how will the new board ensure that there is competent leadership to helm the company?

Out of the proposed directors, Intan and Boon Yew were former members of Datapulse’s board. Intan was an executive director and finance director of Datapulse from 1994 to 2014. She resigned to pursue “other personal interests”. Boon Yew was appointed an independent non-executive director in 2001, and resigned in 2013 due to “pressing personal commitments”.

Koh Wee Seng, meanwhile, is the CEO of Aspial Corp, where Intan is an independent non-executive director. Loo Cheng Guan is founder of Vermilion Gate, an advisory firm for cross-border M&As, and chairman of Precursor Group, a Singapore accounting firm.

See: Datapulse shareholder urges board to engage with SGX to address red flags

Incumbent directors

1. Is a buyback undertaking a sufficient alternative to pre-acquisition due diligence?

The key controversy roiling Datapulse is the acquisition of Wayco Manufacturing for $3.43 million, which manufactures hair care products in Johor, Malaysia. A share purchase agreement was entered into on Dec 12, just a day after the new directors were appointed.

On Dec 15, the board announced a supplemental agreement in which Datapulse can require Way Company, the vendor, to buy back Wayco at the same consideration, within a year from the sale. On Dec 17, Datapulse announced that the acquisition had been completed on Dec 15.

The perceived fast-tracking of the deal without due diligence attracted a notice of compliance from the Singapore Exchange. After a debacle over the initial reviewer appointed, which brought another SGX compliance notice, Datapulse engaged Lee & Lee on April 11. Its review is expected to be completed within two months.

In a March 26 circular to shareholders, the board says that the buyback undertaking is “a reasonable and effective countermeasure against the dogma of or the need for pre-completion due diligence.” Some conditions that may lead the board to enact a buyback are listed as defects in title of the fixed assets of Wayco, the existence of liabilities not reflected in Wayco’s audited accounts or issues with its trademarks.

If shareholders choose the retain the board, perhaps it might be prudent to scrutinise to what extent a buyback undertaking can act as a safeguard for shareholders. Are there any limitations as to when a buyback can be enacted?  

See: Datapulse responds to Mak Yuen Teen

2. How was Teng introduced to the company?

In a Jan 31 interview with The Business Times, controlling shareholder Siew Hong gives some insight into how the current board was put together. Chairman Low Beng Tin was recommended to her by Datapulse co-founder Ng Cheow Chye, from whom she had acquired her controlling stake on Nov 22. Meanwhile Siew Hong knew Teo, Thomas and Kee Swee Ann - who was appointed CEO - over the course of her career as an accountant.  Siew Hong says she put forth their names to the board for consideration.

Kee eventually resigned on Jan 30 citing health reasons. Businessman Teng was later appointed CEO on March 19. Teng’s experience mainly comes from the data centre industry in Singapore, Hong Kong and China, with a focus on sales and business development. However, when previously approached by The Edge Singapore, however, he declined to say who had introduced him to Datapulse.