Withhold director fees, appoint IFA: Great Eastern shareholders propose resolutions to table at AGM

A GROUP of minority shareholders of Great Eastern Holdings (GEH) have proposed three resolutions to be tabled at the insurance provider’s upcoming annual general meeting (AGM), in an attempt to “protect and preserve” shareholder value.

The resolutions are calls to withhold directors’ fees, to change the share option schemes of employees, and to appoint an independent financial advisor (IFA).

According to a letter seen by The Business Times on Friday (Mar 1), a group of close to 80 shareholders have raised concerns over GEH’s depressed share price and continued valuation decline over the last decade, despite its “strong financial position”.

The shareholders are led by independent investor Ong Chin Woo, who noted that most of the group are long-term shareholders of GEH.

At the market close on Friday, shares of GEH – which is majority owned by OCBC – were flat at S$17.85.

This represents a discount of 51.2 per cent from its embedded value per share of S$36.59 for the full year ended 2023.

In an interview with BT, Ong said: “These are reasonable resolutions. First, I want to align everybody – the board, the executives, the shareholders. With that, we can then talk about unlocking value, such that everyone will benefit.”

He said he has raised these investors’ concerns to GEH’s board several times.

He first sent questions to GEH in 2020, when a physical AGM was not held due to the Covid-19 pandemic. In 2022, he represented minority shareholders and sent a letter to GEH’s board, urging it to “do a better job in pursuing tangible actions”.

In 2023, the group of shareholders raised similar questions at GEH’s and OCBC’s respective AGMs.

In the latest letter, Ong and the shareholders are hoping GEH’s board will table the three ordinary resolutions at its upcoming AGM.

In the first resolution, he is proposing to withhold 30 per cent of the board of directors’ fees until GEH’s share price recovers to 0.8 times its embedded value.

Surveying the counter’s price-to-embedded-value ratio between December 2011 and December 2022, Ong noted that GEH has historically traded at around 0.8 times its embedded value.

The valuations, however, have slid 38.8 per cent over the period.

He expects that withholding part of the director fees will help the directors to “better appreciate the situation faced by GEH shareholders”.

In the second resolution, he is proposing to replace OCBC shares in GEH’s current executive share option schemes with GEH shares.

While it is not uncommon for employees in subsidiary companies to receive shares of parent companies as part of their remuneration package, Ong noted that GEH is a listed company with its own minority shareholders.

Replacing OCBC shares with GEH shares will likely better align GEH employees’ interest with that of GEH shareholders, he said.

This should also provide additional assurance to GEH minority shareholders in situations where potential conflicts of interest exist between OCBC and GEH, he added.

In the third resolution, Ong hopes to appoint an IFA to explore options to enhance shareholders’ value.

He noted that there are experienced IFAs that can help enhance shareholder value in a timely and orderly manner.

These measures include increasing normal dividend payouts, paying special dividends, or exploring listing possibilities in markets that offer higher, fairer and more reasonable valuations.

“I totally agree that (the management and directors) cannot be 100 per cent influencing the share price, but we all know that there are tried-and-tested methods to raise value, so get the IFAs to come in,” Ong said.

During a media briefing on Feb 26 for the insurer’s Q4 results, GEH group chief executive Khor Hock Seng said the management focuses on “what is important” – which is to grow new business embedded value (NBEV), profit from insurance business and overall profit.

“For the share price and so on, we will leave it to the market,” he said, in response to questions on what the management is doing to narrow the discount between its embedded value per share and its trading price.

Ong said GEH’s low liquidity is a long-standing, but widely understood, issue among shareholders. But its valuations were acceptable and tracked OCBC’s ups and downs.

He noted that GEH’s valuations started to decline around 2017 and 2018 alongside OCBC’s, but while OCBC’s valuations eventually recovered, GEH’s continued to fall.

“This is ridiculous. If it was just the share price, we would not have said anything, but when the valuations also declined, I think the company can do more,” Ong said.

But the minority shareholders have a hurdle to face.

For shareholders to propose resolutions at AGMs, they have to either represent at least 5 per cent of the total voting rights, or have not less than 100 shareholders with a paid-up average sum of not less than S$500.

Ong said the group of around 80 shareholders likely hold less than 5 per cent of GEH shares.

This is in part due to OCBC’s tight hold on GEH. As at Jun 19, 2023, the lender held 88.4 per cent – or 418.4 million – of GEH shares.

While Ong does not want to speculate on GEH’s and OCBC’s response, he hopes that they will take action in the spirit of good corporate governance, given that this will be a win-win situation for all shareholders.

He noted that OCBC had mentioned in its 2023 AGM minutes that it was aligned with minority shareholders of GEH.

“I will be curious of their reasons if they don’t (support our proposal),” Ong said.

“It will be disappointing if they plainly exercise their legal rights, which they are totally entitled to.”

Responding to BT’s request for comment, a GEH spokesperson noted that there are statutory requirements that need to be met before shareholders can requisition any resolutions to be tabled at an AGM.

“We will look into whether the requirements have been satisfied,” the spokesperson said.

“Notwithstanding, we always welcome constructive suggestions from shareholders to improve group performance as well as improve market recognition of GEH’s share value. GEH’s management will consider the matters raised in the letter it received.”

BT has reached out to OCBC for comments.