What Is The SGX Watch-list?
Singapore Exchange Limited (SGX: S68) is an investment holding company located in Singapore, providing services related to securities and derivatives trading. Being a Self-Regulatory Organisation (SRO), SGX has to balance their profitability objective whilst acting as a frontline regulator of the Singapore market.
In line with ongoing efforts to improve the overall quality of Singapore listed companies and to promote investor confidence, SGX introduced a watch-list for companies listed on Mainboard.
When Will SGX Place An Issuer On The Watch-list?
It would be when:
1) Pre-tax losses for 3 most recently completed consecutive financial years (Based on latest announced full year consolidated accounts, excluding exceptional or non-recurrent income and extraordinary items); and
2) An average daily market capitalization of less than S$40 mil over the last 120 market days on which trading was not suspended or halted. Trading is deemed to be suspended or halted if trading is ceased for a full market day.
What Happens To A Company On The Watch-list?
A recent inclusion to the watch-list was Amplefield Limited (SGX: C60) on Dec 4, 2013. The Group’s principal activities are mainly components manufacturing, precision machining and precision assembly with productions in the Philippines.
Trading in the securities would still continue bar a trading halt or suspension.
The company in the watch-list would have to meet the requirements of Listing Rule 1314 within 24 months from Dec 4, 2013, failing which the SGX-ST would delist the Company or suspend trading in the Company’s shares with a view to delisting the Company.
Aussino Group Limited (SGX: A15) was a company that faced such a fate when its application for an extension of time to meet the requirements of Listing Rule 1314 had been rejected and it would be delisted. Trading of their securities had been suspended from Dec 21, 2013.
A list of companies on SGX’s watch-list can be found here.
How Can A Company Get Themselves Out Of This Pretty Pickle?
There are conditions an issuer must satisfy to apply for its removal from the watch-list. One includes:
1) The issuer records consolidated pre-tax profit for the most recently completed financial year and has an average daily market capitalisation of $40 million or more over the last 120 market days on which trading was not suspended or halted.
Value In Action
Hope isn’t lost if a company is placed on the watch-list but the road back from the dark side is an arduous journey with an example being Next Generation Satellite Communctns Ltd (SGX: B07), formerly known as Ban Joo & Company before an asset sale.
Well we all know what they say about turn-around companies. Therefore, unless one has a detailed understanding of the business and management of the companies included on the watch-list, it may be prudent to explore investment opportunities elsewhere.
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All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.