KUALA LUMPUR: A boardroom battle is brewing at SMTrack Bhd, which provides track and trace solutions using radio frequency identification.

The Edge Financial Daily has learnt that two of SMTrack’s shareholders are seeking to requisition a shareholders’ meeting to remove three existing directors, namely executive chairman Azmi Osman, executive director Datuk Tan Choon Hwa and senior independent non-executive director Chow Hung Keey from the group’s seven-member board.

The two requisitioners are Chung Kah Haur and Queck Han Tiong, who collectively hold 16.48 million shares or about 10% stake in the group.

In place of the three existing directors, the requisitioners want to appoint Chung himself, Kamil Abd Rahman and Lai Mee Hong to the board.

According to a source familiar with the matter, the requisitioners are unhappy about SMTrack’s poor management, pointing to the group’s loss-making position since its listing on the ACE Market of Bursa Malaysia in 2011 when it was still known as Smartag Solutions Bhd.

SMTrack narrowed its net loss to RM3.87 million for the financial year ended July 31, 2018 (FY18), from RM7.38 million in the previous year, which the group attributed to a cost-cutting exercise and reduction in administrative expenses.

However, the group returned to the black in the cumulative nine months ended April 30, 2019, posting a net profit of RM163,000, compared to a net loss of RM699,000 in the previous corresponding period.

“SMTrack has been losing money every year with no sign of improvement,” the source told The Edge Financial Daily, adding that Chung and Queck submitted a requisition letter to the group’s board last Wednesday.

“The requisitioners are also unhappy with the corporate exercise undertaken [in FY18], including a capital reduction and a private placement [to raise up to RM3.9 million], which had resulted in the dilution of their shares,” he added. In July, SMTrack proposed to undertake another private placement — this time to raise up to RM3.22 million.

According to SMTrack 2018 annual report, Azmi, 42, was appointed to the board on Nov 9, 2017 and was subsequently redesignated as executive chairman on Nov 22 last year. He is also currently the managing partner of ABO Consultancy Sdn Bhd, adviser of Crowe Horwath Mongolia TMZ LLC and managing partner of Wall Bridge Consulting LLC.

Tan, 60, was appointed to the board on May 19, 2016. According to the annual report, Tan is the single largest individual shareholder of SMTrack, with a 12.49% stake as at Nov 7, 2018. This is followed by Sarawak tycoon Datuk Amar Abdul Hamed Sepawi, with a 5.83% stake.

Chow, 30, was appointed to the board on Dec 31, 2015. He is currently the chairman of SMTrack’s audit and risk management, and nomination committees and a member of the remuneration committee.

More recently, last Monday, SMTrack’s acquisition of a 60% equity interest in Citilink Aviation (M) Sdn Bhd was completed. The acquisition is part of SMTrack’s plan to venture into the low-cost airline business.

It was reported that Citilink Aviation is seeking to obtain an air operator’s certificate and expects to start operating low-cost flights, with a focus on Asean, in the second quarter of this year. Citilink’s fleet size currently stands at just over 50 aircraft.

Shares in SMTrack rose 0.5 sen or 1.92% to close at 26.5 sen last Friday, bringing a market capitalisation of RM43.4 million. Year-to-date, the stock has risen 194% from nine sen on Jan 2.