Malaysian play in Singapore gone awry
Published: Saturday October 12, 2013
Stratospheric rises and lofty valuations
Blumont was trading at a mere 6 cents a share last August. But it hit a high of S$2.45 barely a year later and there were recent sharp rises in recent times. The same applied for LionGold and Asiasons.
In Asiason’s case, the spike came after they announced a plan to acquire an oil and gas firm, Black Elk, primarily via share issuances at a price of S$2.19 a share. Prior to that the share price was said to see a steady rise as investors began to take notice of the deals the company was executing.
The deal for Black Elk was at a due diligence stage prior to the panic selling of those three stocks and now would have to be reassessed considering Asiason’s depressed share price. The deal could likely be scuttled although insiders say that discussions are still ongoing.
The fact remains that the spike up in prices of all these stocks had no earnings to support them.
Blumont’s Molyneux had this to say at the recent press conference on the valuation of mineral companies: “Resources in the ground is like having gold bullions in your safe, discounted of course to its extraction cost. Mineral companies have value before they have revenue,” he said, adding that major mining companies were valued this way abroad.
The stocks, nonetheless, were trading at mind-boggling trailing price earnings multiples and book values, caused mainly by a steep and sudden surge in the share prices of those companies.
Sentiment had been strong
Sceptics reckon that the recent sell down of these Malaysian-controlled stocks leave a bad taste among investors in Singapore. And they speculate that this incident will impact other Malaysian stocks listed there.
Interestingly, some investors point out that all three stocks were in fact part of a recent Malaysian-themed run up. The proposed takeover of Albedo Ltd, the company that is aiming to be an Iskandar Development Region property player through a reverse takeover deal by Malaysian tycoon Tan Sri Danny Tan, was also in the limelight in August.
Investors were touting it as ‘another Rowsley Ltd in the making’. Rowsley is controlled by Singaporean billionaire Peter Lim.
Loss-making steel trader Albedo was actively traded in August, with volumes surpassing the billion mark.
Albedo said it would be able to continue, citing its fund raising exercises and continued support from its principal bankers
In June, the company said it had entered into a MOU to buy Coeur Gold Armenia Ltd, a gold miner in Armenia. It aborted the purchase on Aug 16 and four days later announced its intention to buy land in Iskandar, Johor.
Albedo’s shares quadrupled from 2 cents to about 7.6 cents in August.
About the same time that the Blumont, Asiasons and LionGold started tumbling, Albedo also fell sharply, and is now hovering at the 4.6 cents level.
But says one Singapore broker, “I wouldn’t say that this saga has cast a shadow on Malaysia companies per se. Investors are honing in on whether these companies had real, legitimate businesses”.
Brokers also said that prior to the designation of the stocks on Oct 4, sentiment had been strong.
“People were crazy for these stocks. These were known companies. On and off, there would be news articles on the mergers and acquisitions done by these companies,” said one Singaporean broker.
Now that all stocks have plummeted, he said that questions were kicking in, and investors were starting to pay more attention to the businesses of these companies.
“Of course people are panicking. These stocks took a year to go up, and lost 90% of that value in 3 days.”
Full article:
http://www.thestar.com.my/Business/Busi ... o-fre.aspx
Related article:
Singapore exchange steps up stock trading scrutiny; confusion over curbs
Several brokerages in Singapore could lose millions of dollars in the wake of recent sharp price falls in three stocks, traders said
http://www.reuters.com/article/2013/10/ ... 3620131011
