Datapulse gets shareholders' nod to move into hotel investments

Singapore

DATAPULSE Technology's board led by its chairman of seven months Aw Cheok Huat mostly got its way at Thursday's extraordinary general meeting (EGM) that cemented the course for the cash-rich company's shift into hospitality.

But a proposal to change its name to Capiti Property Partners to reflect its new focus failed as some shareholders felt it wasn't necessary.

"What's in a name? Life goes on. If they like the name they can carry on. The more important thing is the substance of the company's direction. That was approved," Mr Aw told The Business Times after the meeting that lasted just under two hours and was attended by nearly 120 shareholders.

Except for the proposed name change to signal its exit from the media storage business and entry into property, the other six resolutions were passed, the most significant of which involved Datapulse's expansion into hotels and the proposed buyout of its first asset in this space, Hotel Aropa in Seoul for 35 billion Korean won (S$42.7 million).

The temperature at this meeting was markedly cooler than previous ones, which saw minority shareholders turned up in force to express their displeasure at the board's decision to embark on new businesses instead of distributing to shareholders a portion of the group's healthy cash pile, which stood at S$75 million as at end-October 2018.

During Thursday's meeting, vacant seats were visible at the EGM venue in YMCA Singapore, in contrast to a packed room at the EGM a year ago amid bitter a shareholder tussle.

"Based on the previous experience, I am not that optimistic but hopefully it will turn out well...," said retired human resources manager Chew Ah Kong after the meeting.

He was referring to Datapulse's hasty S$3.4 million acquisition of Malaysia hair care company Wayco Manufacturing in December 2017. The deal was defended by Datapulse's board then as a "value chain play" but drew great consternation among investors and even triggered a major shareholder fight.

Under a new board since the emergence of Mr Aw as a substantial shareholder last July, the business is being sold back at a loss as it no longer fits in with the group's property agenda.

Still, many shareholders came well prepared to discuss and query the board on the merits of its latest hotel deal. They also continued to press the board to pay more dividends.

"We all know that the previous board jumped into hair care without reviewing other businesses and options. By jumping into and investing in a hotel in South Korea, is this board not following the path of the previous board?," asked Ng Bie Tjin, Datapulse's former finance director and daughter of the company's co-founder Ng Khim Guan.

Ms Bie Tjin, a substantial shareholder, had last year launched a challenge to oust several newly-appointed directors who had backed the Wayco buyout shortly after the surprise entry of Ng Siew Hong as the company's controlling owner. Her bid failed but the long drawn saga hurt Datapulse's stock price.

"First of all, we didn't jump into this (hotel) acquisition. The evaluation phase involved many consultants and much work. We deliberated many times and had long sessions on the negotiations," replied Mr Aw who is also chairman of Catalist-listed ICP Holdings which he controls.

"You cannot wait for best deal that can possibly come out in future. We look at what we have available and ask if it's a good business decision," he added.

Corporate governance advocate Mak Yuen Teen, who has over the past year scrutinised the company's every business move, including its latest hotel investments, asked a number of questions.

Associate professor Mak, who teaches at NUS Business School, remarked that shareholders would be more comfortable if Mr Aw were to raise his stake in Datapulse to the same level as his holdings in ICP. This way, his interests in both companies would be aligned, he said. Mr Aw owns 23.8 per cent and 10 per cent of ICP and Datapulse, respectively.

"My response is that it's comparable. My economic interest in Datapulse is the same as my interest in ICP - not in percentage terms but in absolute amounts," Mr Aw replied, to which Prof Mak disagreed as he insisted that the percentage mattered more in terms of who stood to gain more in any given transaction.

On why Datapulse is forking out some S$6.2 million to refurbish the South Korean hotel considering the last refurbishment was done only in 2016, Mr Aw said it was necessary as part of the group's repositioning of the hotel as an international midscale brand.

"It needs to be done up so it can do what it's supposed to do for us. Once the property is refurbished, I will extend a private invitation to Professor Mak to look at the hotel and its location," he quipped.

The exchanges were not limited to the shareholder meeting. Earlier on Thursday morning, Datapulse issued a lengthy response to Prof Mak's recent blog postings in which he queried, among several things, the board's expertise in the hospitality business.

The company said Mr Aw does have experience in hotel management, as outlined in a shareholders' circular.

In any case, it does not intend to go into hotel management but instead, invests in hotels and hospitality assets, which lies within the experience of Mr Aw and Mr Sin Boon Ann, an independent, non-executive director.