PN17 companies struggle to stay afloat
KUALA LUMPUR: The potential removal of companies from Bursa Malaysia for failing to submit financial regularisation plans is becoming an increasingly familiar reality in the 2025 corporate landscape.
Since January, at least one company has been shown the door, while two more under Practice Note 17 (PN17) face potential delisting amid an increasingly challenging global economic environment.
Last month, Reach Energy Bhd became the first to be delisted this year, on April 29, after its third extension request to submit a regularisation plan was rejected.
The oil and gas company, once a high-profile special purpose acquisition company (SPAC), had failed to demonstrate a viable turnaround strategy despite repeated assurances.
It slipped into PN17 in April 2023, after the shareholders' equity fell below 50 per cent of its share capital as of the fiscal year ended Dec 31, 2022.
In terms of financial performance, for the fiscal year ended Dec 31, 2024, Reach Energy reported revenue of RM207.83 million, a slight decrease from RM208.67 million in the previous year.
The company recorded a net loss of RM18.11 million, an improvement compared to the RM208.3 million loss in the prior year.
On Tuesday, Sarawak Cable Bhd and Annum Bhd were flagged for potential delisting after Bursa rejected their appeals for more time.
Both companies are scheduled for trading suspension on May 28, with delisting set for May 30, unless a fresh appeal is submitted and accepted.
In early trade, shares of Sarawak Cable and Annum plunged by 56 per cent and 70 per cent, respectively.
Sarawak Cable continued to slide throughout the day, ending 62.5 per cent lower at 3 sen with a total of 59.1 million shares traded. Annum tumbled 80 per cent, losing 4 sen to close at 1 sen, with 7.9 million shares changing hands.
Tradeview Capital fund manager Neoh Jia Man said while the share price crashes may appear dramatic, they are not out of the ordinary within the current market context.
"The share price performance of both firms on Wednesday is not unusual, as it merely reflects the broader weak market sentiment," he told Business Times.
Neoh advised investors not to concentrate only on day-to-day share price changes, but to pay closer attention to shifts in a company's fundamentals, especially when firms fail to stabilise their operations, increasing the risk of delisting.
"Although the technical triggers for their classification as PN17 or GN3 (under Paragraph 8.03A) differ, the underlying issue is the same: both firms are considered to have insufficient levels of operations to meet ongoing listing requirements," he added.
He said there are not any particular industries or sectors that are more prone to delisting, as the risk of being delisted due to inadequate business operations is generally not tied to any specific sector.
"Investors should seek to understand the root causes of the potential delisting in each case. It is crucial to engage management on their recovery plans, as this may offer insight into the likelihood of a white knight emergence or the viability of a new business plan," he added.
Meanwhile, several other distressed firms have received temporary reprieve.
Pertama Digital Bhd and Iskandar Waterfront City Bhd were recently granted six-month extensions by Bursa to finalise their respective regularisation plans.
Majuperak Holdings Bhd, a Perak state-linked developer, was given until October 11 to submit its proposal.
The developer's turnaround strategy involves several key elements, including acquiring strategic assets, selling off underperforming properties, and investing in renewable energy initiatives.
PN17 and Guidance Note 3 (GN3) are designations by Bursa Malaysia for financially distressed companies listed on the stock exchange.
These classifications apply to firms experiencing issues such as shareholders' equity dropping below 25 per cent of paid-up capital or loan defaults.
Affected companies are required to submit a regularisation plan, typically within 12 months, or risk suspension and potential delisting.
Currently, 24 companies are classified under PN17 and GN3 on Bursa Malaysia, representing about 2.34 per cent of the 1,025 listings across the Main and ACE Markets.
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