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.
|Biosensors Int’l Group Ltd
|China Dairy Group
|China Hongcheng Holdings Ltd
|Pacific Healthcare Holdings
|China Merchants Holdings (Pacific)
|Chinasing Investment Holdings
|Sim Lian Group
|Eu Yan Sang Int’l
|HTL Int’l Holdings
|Tiger Airways Holdings
|XinRen Aluminum Holdings
|Nepture Orient Lines
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.
About the author
Chong Kai Xiang (Kai)
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.