Delisting & Privatization trend in 2016 January 19, 2017

After shaking off the New Year holiday mood, I thought that providing a summary and analysis on the delisting privatization trend on SGX in 2016 would be a good way to guess what is awaiting us in the year of 2017.

Delisted & Privatized Companies in 2016

As of 8th December 2016, a total of 28 companies have delisted from SGX for the year of 2016. Some of these companies are well-known names that most Singaporeans are familiar with. Two of such companies are SMRT Corporation Ltd. and Osim International.

Company Delisted Date Company Delisted Date
AAT Corp 13-01-2016 OGL Resources 31-08-2016
Biosensors Int’l Group Ltd 20-04-2016 OSIM Int’l 29-08-2016
China Dairy Group 13-06-2016 Otto Marine 07-10-2016
China Hongcheng Holdings Ltd 22-11-2016 Pacific Healthcare Holdings 30-08-2016
China Merchants Holdings (Pacific) 26-08-2016 Pteris Global 07-09-2016
Chinasing Investment Holdings 05-12-2016 Select Group 06-09-2016
China Yongsheng 01-07-2016 Sim Lian Group 01-11-2016
Eastern Holdings 08-03-2016 Sinotel Tech 15-03-2016
Eu Yan Sang Int’l 07-10-2016 SMRT Corp 31-10-2016
HTL Int’l Holdings 09-09-2016 Texchem Pack 14-04-2016
Interplex Hldgs 08-06-2016 Tiger Airways Holdings 11-05-2016
Lantrovision (S) 17-06-2016 XinRen Aluminum Holdings 26-05-2016
MFS Technology 16-05-2016 Xyec Holdings 02-06-2016
Nepture Orient Lines 06-09-2016 Zagro Asia 13-04-2016

Source: SGX website

Osim International founder – Mr Ron Sim announced his intention to take the company private in late March 2016 and managed to delist the company on 29th August 2016 after gathering more than the necessary 90% shares at $1.39 per share.

The used-to-be investor favorite stock for dividend, SMRT was delisted on 31st October 2016, ending a 16-year saga which saw a government-linked entity trying to balance public needs along with private investors’ interest, often with mixed result.

Reasons for big names privatization

The privatization trend can be attributed to mainly 2 reasons:

Firstly, due to poor business environment and results, the share price of these big names have been overly punished by investors, making the owners feel that their companies were undervalued. This apparently was what prompted Mr Sim to take Osim private.

Secondly, companies listed on SGX are required to provide quarterly or semi-annually reports to investors and are required to keep track of their management responsibilities. Not only is this a cost to the company, it may also take up precious time of the management, time which they could have spent on turning the business around.

Big names with strong fundamentals who are confident to steer their business back on track would take this opportunity to delist at the undervalued price and spend the time and effort focusing on their long term business strategy instead of answering to a small handful of investors.

2017, more companies to be delisted?

If the global economy continues to be lethargic and causing the share prices of more companies to be undervalued, this is entirely possible.

A sector to take note for potential privatization in 2017 will be the Offshore & Marine (O&M) industry. Even though oil price has rallied to above USD $50 per barrel since OPEC agreed to a production cut in late 2016, it will take at least 2 years for the O&M companies to feel the dribble down effect from the hike in oil price, provided that the oil price does sustain above USD $50 during this period.

During this period, the O&M companies will still be under scrutiny and pressure from their investors over their performances. To avoid these, some of the O&M companies may opt to delist and operate in a less stressful environment.

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About the author

Chong Kai Xiang (Kai)
POEMS Dealer
Raffles City Dealing Team

Chong Kai Xiang (Kai) is an Equities Dealer in the Raffles City Dealing Team, and currently provides dealing services to over 35,000 trading accounts.

Kai frequently conducts seminars to enrich his clients' trading and financial knowledge. Apart from this, Kai also provides weekly market updates to his clients to keep them informed and up to date on their stock holdings.

Kai holds a Bachelor Degree of Finance from the SIM University – UniSIM and was awarded the CFA Singapore Gold Award and CFP® Certification Achievement Award in 2015.