Delistings likely to outpace IPOs

[DDCA]

An article about delisting of stocks from SGX appeared in The Business Times on 18 Jul 2011. In fact, when I was watching the 10pm Channel 8 news just now, there is a news segment that mentioned since May 2011, there was more interest in delisting of under-valued property stocks, sparked off by Allgreen and more recently, Australand. Someone (cannot remember the name) was interviewed saying that properties whose price is much less than NAV would be potential target, such as Guocoland and Ho Bee. Perhaps we will see price increase in some of the property stocks tomorrow.


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Delistings likely to outpace IPOs

SGX firms have become attractive targets amid a weak IPO market

By LYNETTE KHOO

(SINGAPORE) The Singapore Exchange (SGX) could end up with more delistings than new listings this year, as the privatisation wave continues to sweep the bourse on the back of tepid market conditions and depressed valuations.

If this continues and the market for IPOs (initial public offerings) stays quiet, the number of companies voluntarily leaving the local exchange is set to outpace those joining, market watchers predict.

At least 14 companies have sought the privatisation route so far this year, out of which 11 have since been suspended from trading or taken off the exchange. And this is not counting the mandatory delistings that have been ordered by the SGX. At the same time, there were only 12 new listings and two backdoor listings from reverse takeovers.

'Given the current trend, it is quite possible that we may see more delistings than IPOs by the end of this year,' said Stamford Law director Soh Chun Bin.

'Even if conditions improve before the end of the third quarter, the window to successfully launch IPOs is getting smaller and as such, there isn't likely to be an improved flow of new listings for the rest of this year,' he said.

One factor behind the delistings is that Singapore-listed companies have become attractive targets for global names looking to expand in Asia, market players say.

'Singapore companies have been investing and operating in the region for many years and, together with their perceived better management and governance, have become natural targets for such investors wishing to acquire a platform into the region,' said Wong Ai Ai, principal of Baker & McKenzie.Wong & Leow.

'These investors are interested in the businesses and not the listing status of the companies. So, most of them would prefer to privatise and delist their acquisitions so that they will have more flexibility to run or restructure the businesses away from the strictures of compliance and public disclosures.'

Such potential targets could be found in the manufacturing, pharmaceutical and healthcare, and logistics sectors, Mrs Wong added.

Robson Lee, a corporate lawyer, noted that whenever the IPO market is weak, the focus tends to shift to mergers and acquisitions as potential acquirers see opportunities to buy companies cheaply.

The most recent example is Nestle SA's acquisition of a 60 per cent stake in Hsu Fu Chi International for $2.1 billion. The deal would result in a delisting of the largest China-based confectioner from the SGX.

Port operator Portek International has also become a coveted target with two competing offers from Japan's Mitsui & Co and Philippine's International Container Terminal, with the higher offer from Mitsui valuing Portek at $221 million. Earlier in January, Kim Eng received an offer from Malayan Banking that priced the Singapore brokerage at $1.79 billion.

In another major trend, some major shareholders in listed entities are also taking them private, as they find that current valuations and liquidity do not justify the higher compliance costs associated with a listing.

Following the successful privatisation of property counters MCL Land and Soilbuild by their major shareholders last year, Allgreen is also heading for the exit, after its controlling shareholder Robert Kuok, Malaysia's richest man, tabled a deal this year that valued Allgreen at $2.54 billion.

Among S-chips or SGX-listed Chinese firms that have exited the stock market this year, Passion Holdings and Time Watch Investments were privatised by majority shareholders while Sinomem Technology was acquired by a Beijing-based private equity firm CDH Water.

'Companies who feel they are undervalued and are able to obtain better listing valuations on other regional stock markets, especially China-based corporates that are currently shunned by local investors, will find that it makes sense to delist from SGX and list their companies on another stock exchange in order to maximise shareholders' value,' said Brendan Goh, head of corporate finance at DMG & Partners Securities.

The good news for minority shareholders is that most offers this year were made at significant premiums to the net asset value (NAV) per share of the target companies, with the highest premium seen in Nestle's bid for Hsu Fu Chi. Only two offers - for Allgreen and Financial One - were made at a discount to NAV per share.

Apart from voluntary delistings, there has been a slew of mandatory de-listings. These involved companies unable to haul themselves off the watchlist for loss-making firms, or suspended counters unable to produce an approved trading resumption proposal.

Some market watchers felt that the spate of delistings is hurting the market's vibrancy, given that listings are the lifeblood of stock exchanges. Investors have also expressed unhappiness with the absence of exit offers in several mandatory delist-ings, and have urged SGX to apply more strictly listing rules that call for a reasonable exit offer in a delisting exercise. But when it comes to voluntary de-listings, there is apparently little SGX can do, since this is driven by market sentiment, Mr Lee noted.

Mark Liew, managing director for corporate finance at PrimePartners, pointed out that the current delisting wave and muted IPO market resulted also from cyclical factors.

While uncertain market sentiment will impact the timing of new listings in the second half of the year, 'we continue to see many Asian-based companies interested in listing to raise expansion capital, indicating that the owner or management's view of the fundamentals remains sound', Mr Liew said.

[DDCA]

Now appeared on ChannelNewsAsia:

Share delisting trend seen to continue on SGX
By Linette Lim | Posted: 19 July 2011 2304 hrs

SINGAPORE: Recent share delistings, especially among property counters on the Singapore Exchange (SGX), have raised the interest of small shareholders.

This is because delisting bids can come with attractive exit offers as high as a 20 per cent premium to the stock's last traded price, according to Liu Jinshu, SIAS Research investment analyst.

Analysts expect the delisting trend to continue, given the lacklustre mood in the stock market.

The delisting bids of property counters MCL Land last November and Allgreen in May have left shareholders looking out for more counters that may follow suit.

Analysts said potential privatisation targets are usually those that have a majority shareholder owning between 50 and 70 per cent of the company and are trading at a steep discount to their book value or revalued net asset value (RNAV).

Liu said: "Recently we've seen several delisting cases on the SGX, and names have popped up as potentials.....for example Guocoland and Ho Bee."

Analysts said listed companies may also want to take their companies private when their shares are thinly traded on the exchange.

They added that some companies may also choose to delist here but to be relisted on another bourse with more attractive valuations.

Terence Wong, co-head of research at DMG & Partners, said: "Some of the sectors that could likely see such privatisation would likely be in the consumer space, as well as some of the S-chips. Many of the S-chips are trading at just half of what they used to be trading at."

Some non-property companies that have delisted include Chinese retailer Time Watch and Taiwanese lender Financial One.

Market watchers said one issue that may crop up during delisting is the protection of minority shareholders' interests.

Nicholas Mak, executive director for research & consultancy at SLP International, said: "Let's say the listed entity were (is) currently traded at a significant discount to their current IPO price, for some of their loyal shareholders who bought shares from the first day when it was listed, once it goes delisted, I think some of them may be deeply disappointed that they have suffered quite a significant loss."

Besides ending up with a loss, minority shareholders may also be deprived of future share price gains when a company is delisted.

[DDCA]

An article about delisting of stocks from SGX appeared in The Business Times on 18 Jul 2011. In fact, when I was watching the 10pm Channel 8 news just now, there is a news segment that mentioned since May 2011, there was more interest in delisting of under-valued property stocks, sparked off by Allgreen and more recently, Australand. Someone (cannot remember the name) was interviewed saying that properties whose price is much less than NAV would be potential target, such as Guocoland and Ho Bee. Perhaps we will see price increase in some of the property stocks tomorrow.

The Channel 8 news video can be found here