Great Eastern chairman appeals for patience as shareholders fume over share price ‘disaster’

GREAT Eastern Holdings (GEH) chairman Soon Tit Koon has appealed for shareholders to remain patient as the board continues to work on boosting returns.

Speaking at the annual general meeting (AGM) of OCBC’s insurance arm on Thursday (Apr 25), Soon said that GEH’s board has heard its shareholders’ concerns of falling returns, and will look into the suggestions they provided.

“If the share price has not (met your expectations), we seek your understanding and we appeal for your patience,” said Soon, who was appointed as chairman in April 2023.

He was responding to repeated comments from shareholders on the decline in GEH’s total shareholder returns.

At the AGM, which lasted nearly three hours, several shareholders questioned what GEH was doing to improve its returns, in particular its share price, which one investor called “a disaster” and another said it had “underperformed massively”.

Measures to improve returns

Soon said the board has already taken steps to improve GEH’s total shareholder returns.

This includes changing its dividend policy to pay out dividends half yearly, and target a full year payout based on the sustainable profit level of the insurer.

The insurer paid out a yearly dividend of S$0.75 per share for FY2023, up from S$0.65 per share a year earlier.

Based on GEH’s current share price – the counter closed 0.7 per cent higher at S$18.62 on Thursday – this should translate into a “fairly respectable” dividend yield of around 4.3 to 4.4 per cent, Soon said.

Given the volatile nature of GEH’s profits, due to investment contributing a large part to its earnings, Soon said a fixed dividend payout percentage on profits will result in volatile dividends, which “will not be desirable”.

Meanwhile, what the board can do for the share price is “more limited”, although it has also taken steps such as increasing investor relation activities with key analysts and shareholders, he said.

The insurer has also undertaken capital management measures to have more equity to deploy, he added.

“We are taking this share price issue seriously, particularly since the last AGM, and we have taken action in order to try to improve both share price and TSR to shareholders,” Soon said.

Soon also addressed the three resolutions that were proposed by a group of minority shareholders but not tabled at the AGM.

In March, a group of GEH minority shareholders led by former remisier Ong Chin Woo urged for three resolutions to be tabled at Thursday’s AGM, which they expect will “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 adviser (IFA).

Addressing shareholders’ concerns

While the resolutions were eventually not tabled due to legal reasons, GEH said it was prepared to discuss the concerns at the AGM.

On the director’s remuneration, Soon said that linking the directors’ fees to the insurer’s share price performance is not desirable, as it may cause directors to drive short-term gains at the expense of long-term profitability.

On replacing OCBC shares in GEH’s current executive share option schemes with GEH shares, Soon reiterated that the bonuses are based entirely on GEH’s performance and not OCBC’s, which encourages employees to continue working hard to improve GEH’s performance.

He noted that GEH’s small trading volume makes it difficult to acquire shares and leaves cost uncertain, while the move will also drain liquidity further.

“The only thing that is lacking, is that (profit) performance need not lead to share price performance. That to me is unfortunate, because the share price (movement) will depend on many other factors.”

Nevertheless, Soon said that its employees were aligned to improve the performance of GEH.

Soon said the board’s remuneration committee will review its management compensation structure and find better ways in the year ahead.

It will also take on board all the ideas and suggestions of shareholders and deliberate on them, he added.

As for the third resolution to engage an IFA, Soon said the company received advice consistently from investment bankers and consultants through the year, and the insurer will continue to maintain active engagement after the AGM.

In a media release after the AGM, Ong said the shareholders welcomed the board’s willingness to discuss the issue and acknowledged its efforts thus far, but “more can be done”.

Ong said the reasons behind using OCBC shares to pay deferred bonuses was “unconvincing”, and questioned how the “one OCBC Group” spirit will promote loyalty to GEH and enhance minority shareholders’ value.

He hopes GEH will articulate a “clear and concrete plan” to address its remaining concerns.