Singapore Exchange Suspends Trading in Shares of Three Speculative Companies after their prices plunged dramatically

Oct 3, 2013

Singapore Exchange Suspends Trading in Shares of Three Companies

CHUN HAN WONG

SINGAPORE—Singapore Exchange Ltd. suspended trading on three companies’ shares after their prices plunged dramatically in early Friday trade, wiping out strong gains notched in recent months. In less than an hour of trading, sterilization-services provider Blumont Group Ltd. lost more than 56% of its market value, while share prices of Asiasons Capital Ltd. and LionGold Corp. Ltd. plunged by 61% and 42% respectively. Friday’s sharp drops followed weeks of substantial gains in the three companies’ share prices, which had prompted the exchange to issue official queries seeking explanations for the increases.In separate statements Friday, Singapore Exchange said it suspended trading on the three stocks “to safeguard the interests of the market as there could be circumstances that would result in the market not being fully informed.” It didn’t say when and under what conditions trading may be allowed to resume.

The exchange has also publicly requested the three firms to explain Friday’s declines, though the companies have yet to respond.

A spokeswoman for Blumont declined to comment, while Asiasons and LionGold executives couldn’t immediately be reached for comment. Blumont executives were scheduled to give a news briefing Friday afternoon, but postponed it indefinitely after the share suspension.

Blumont announced before markets opened Friday that it had agreed terms on a proposed takeover of a unnamed foreign-listed coal mining company for up to S$146 million (US$117 million). It planned to pay for the deal by issuing 72.2 million new shares at S$2.02 each—Blumont’s closing price Thursday. Its share price fell to S$0.88 before trading was suspended.

Before Friday’s plunge, Blumont’s share price has risen by more than eight times in the first nine months of 2013, boosting its market value to S$6.3 billion from S$508 million. The stock rallied for nine straight sessions from Sept. 18-30, boosting its price by 86%, and scaled an all-time peak of S$2.54 on Tuesday.

This rally prompted Singapore Exchange requested Blumont to publicly account for the sharp gains, saying that the company’s acquisitions and investments in nine firms over since December—the largest of which was worth S$48 million—“may not sufficiently explain the steep increase in the price of Blumont shares.”

In responses filed Tuesday and Wednesday, Blumont said it wasn’t aware of any previously unannounced company-related information that could explain the share-price gains. But the company also listed what it believed to be possible contributing factors, including its push to diversify into mineral and energy-resource sectors, recent investments in metal producers and coal miners, and foreign-investor interest in its shares.

Asiasons, an investment and asset management company, saw its share price drop to S$1.04 before trading was halted. It closed at S$2.70 on Thursday. Friday’s decline wiped out gains Asiasons had reaped over a seven-session surge from Sept. 9-19, during which its share price jumped by nearly three times to a record S$2.91.

Singapore Exchange had twice queried Asiasons on sharp share-price increases on Sept. 9 and Sept. 18. Asiasons on Sept. 9 said it was “considering and evaluating potential investment opportunities,” and on Sept. 18 the company said its share-price movement could be explained by its S$218 million deal to buy 27.5% stake in U.S.-based Black Elk Energy Offshore Operations LLC, which was announced on Sept. 17.

LionGold, which invests in gold mining and exploration, fell to as low as S$0.86 early Friday—the lowest level since January 2012—and was last quoted at S$0.875 before trading was suspended. It closed on Thursday at S$1.51.

The company’s share price had risen by 55% from mid-July to late August, during which it peaked at S$1.755 on Aug. 27. LionGold announced on July 29 that it had agreed to buy Acadian Mining Corp., a Canadian gold firm, for S$9.1 million.

SGX Suspends Blumont, Liongold, Asiasons as Stocks Plunge

Singapore Exchange Ltd. (SGX), Southeast Asia’s biggest bourse operator, suspended the trading of Blumont Group Ltd. (BLUM), LionGold Corp. and Asiasons Capital Ltd. (ACAP) after shares of the commodity investors plunged.

Blumont, which invests in minerals and energy resources, tumbled 56 percent to 88 Singapore cents, the second-biggest decliner on the FTSE ST All-Share Index (FSTAS), before the trading suspension. The company said today it will issue new shares at S$2.02 to fund the acquisition of an unnamed coal company traded overseas for as much as S$145.9 million ($117 million).

Asiasons, which last month bought a stake in Black Elk Energy Offshore Operations LLC, a U.S.-based oil and gas producer, plunged 61 percent to S$1.04, the steepest decline on the gauge. LionGold, which said last month it was in talks to buy as many as three gold mines, slumped 42 percent to 87.5 Singapore cents.

Trading was suspended by SGX to “safeguard the interests of the markets as there could be circumstances that would result in the market not being fully informed,” according to a statement from the bourse.

Regulators around the world have stepped up oversight of capital markets after coming under scrutiny during the global financial crisis in 2008. The Monetary Authority of Singapore established a 13-member council in 2010 with a goal to boost corporate governance standards and investor confidence.

“The concern is that short sellers are taking advantage of the weak market sentiment,” Kelly Teoh, a strategist at IG Markets in Singapore, said by telephone. “It is a good thing that SGX shows it’s on top of everything. It is in the market interest to have some sort of a policing environment.”

Blumont, LionGold and Asiasons didn’t immediately reply to telephone calls and e-mails seeking comment.

Blumont had soared more than 1,000% this year through the end of September, prompting SGX to ask the company to explain the reason for the steep increase.

LionGold jumped 46 percent in August, touching a record intraday high of S$1.755 on Aug. 27, while Asiasons rose to S$2.83 on Oct. 1 for its highest-ever close.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

SIAS draws attention to Blumont amid SGX query

02 October 13  The Business Times  by cai haoxiang haoxiang@sph.com.sg

INVESTOR lobby group Securities Investors Association (Singapore), or SIAS, has called for a “speedy investigation” into the unusual share price rise in Blumont Group. The call comes even as Blumont replied to a Singapore Exchange (SGX) query yesterday that it was not aware of any unannounced reasons that accounted for its share trading activity.

SIAS said Blumont shareholders need to know the reason for the price rise and whether it is supported by fundamentals. The company is now trading at close to 500 times its earnings over the last 12 months, and about 60 times the value of its net assets.

“We hope there is an acceptable explanation by the company. If not, SIAS calls on the relevant authorities to investigate this unusual stock activity immediately,” said SIAS president David Gerald.

From around two cents a couple of years ago and an adjusted six cents a year ago, Blumont charged to a historical high of $2.45 on Monday and dipped one cent to $2.44 yesterday.

At a market capitalisation of $6.3 billion, Blumont is as valuable as Singapore Press Holdings (SPH), twice as valuable as telco M1, and three times as valuable as SMRT Corp, Wheelock Properties, or Venture Corp.

Blumont currently gets most of its revenue from providing sterilisation services to get rid of bacterial contamination of food products. It declared revenue of $714,000 in its second quarter ended June 30 and a loss of $22.4 million mainly due to fair value losses on financial assets.

Since the end of last year, the company has been expanding into the mineral and energy resources sector. It announced a string of investments, including a number of small deals of under A$/US$10 million.

On Sept 19, Blumont announced its largest deal to date, an A$116 million investment in Brisbane-based copper explorer Discovery Metals, comprising A$8.8 million in equity and US$100 million of convertible bonds.

In a detailed query to the company yesterday, Singapore Exchange (SGX) noted that the company announced a rights issue at end-July at five cents per rights share, on the basis of one rights share for every two ordinary shares. Blumont raised $43 million by issuing 861 million new shares. The rights shares started trading last Thursday and rose from $2.10 to $2.57, higher than Blumont’s share price, SGX noted.

Various announcements of acquisitions “may not sufficiently explain the steep increase in the price of Blumont shares”, SGX said.

Yesterday, Blumont reiterated its compliance with listing rules and said it was constantly in discussions with various parties on growth and development opportunities.

“These opportunities are still preliminary and no definitive agreements have been executed in respect thereof,” the company said.

“In any event, there is no certainty that any of these discussions will materialise.”

SIAS and SGX query ‘steep increase’ in Blumont share price

SINGAPORE — The Securities Investors Association Singapore (SIAS) has questioned an eight-fold jump in the share price of mainboard-listed investment firm Blumont Group this year, calling on the company to provide an “acceptable explanation” on the unusual stock activity.

BY WONG WEI HAN –

02 OCTOBER

SINGAPORE — The Securities Investors Association Singapore (SIAS) has questioned an eight-fold jump in the share price of mainboard-listed investment firm Blumont Group this year, calling on the company to provide an “acceptable explanation” on the unusual stock activity.

“We hope there is an acceptable explanation by the company,” said SIAS President and CEO David Gerald. “If not, SIAS calls on the relevant authorities to investigate this unusual stock activity immediately and let all stakeholders know the reasons for the unusual share price hike. Should the investigations reveal breaches of the law, then the full weight of the law must be brought to bear on the wrongdoers, if any.”

SIAS’ queries follow that of the Singapore Exchange (SGX), which earlier yesterday questioned Blumont on the “steep increase” of its share price.

Blumont’s share price has risen eight-fold to S$2.45 between Jan 2 and Sept 30, while its market capitalisation has increased 12.5-fold to S$6.3 billion during the period.

The firm’s announcements on acquisitions and investments in nine companies since December last year were mostly small and do not “sufficiently explain the steep increase”, the SGX said.

Trading of Blumont’s shares was halted for one-and-a-half hours yesterday after the SGX requested clarification on the matter. It closed down 0.4 per cent at S$2.44.

In response, Blumont said in a statement that it is not aware of any information not previously announced that might explain the increase and that it remains in compliance with the listing rules.

The Straits Times

Published on Oct 01, 2013

Singapore-listed Blumont Group queried by SGX over rise in share price

By Fiona Chan

Singapore-listed investment holding company Blumont Group halted trading in its shares for an hour and a half on Tuesday morning after being queried by the Singapore Exchange (SGX) over an unusually steep rise in its share price.

SGX noted that Blumont’s share price has risen from 30 cents on Jan 2 this year to $2.45 as at Sept 30.

“This is an eight-fold increase over only nine months,” the SGX said, adding that Blumont’s market capitalisation has jumped over the same period from $508 million to $6.3 billion – a 12.5 fold increase.

While Blumont has announced a series of acquisitions since December last year, most were relatively small and “these announcements may not sufficiently explain the steep increase in the price of Blumont shares”, the SGX said.

Blumont’s staggering stock performance raises many questions

Published October 3, 2013 HOCK LOCK SIEW
By Angela Tan
INVESTORS of Blumont Group, whose stock is arguably one of the best performing this year, would be laughing all the way to the bank had they held on to the shares they bought early this year.After hovering at around 20 to 30 cents in late 2012, the stock has been heading northwards this year, ending at $2.39 yesterday despite shedding five cents. This even after the stock traded ex-entitlement on Sept 19 for a 1-for-2 rights issue at five cents. Some label it a darling stock, citing the volumes that accompanied the sharp spike of late.
So what exactly is this gem of an investment?  Blumont was previously Adroit Innovations, an e-business solutions provider offering a full range of Internet professional services. In April 2011, it changed its name to Blumont. Today, led by chairman Neo Kim Hock and executive director James Hong, it derives most of its revenue from the provision of sterilisation and irradiation services.
But its recent financial performance has not been particularly impressive.  For the second quarter ended June 30, 2013, Blumont suffered a loss of $22.39 million (due to fair value adjustments of financial assets) compared to a net profit of $11.90 million a year ago. Revenue fell 5 per cent to $714,000. As a result, net profit for the first six months of 2013 fell 63 per cent to $8.58 million compared to $23.39 million a year ago.  As at end-June 2013, its net cash and cash equivalent stood at $2.2 million, a rise of $0.62 million from end-2012, due mainly to the sale of quoted financial assets and a property at Clear Water Residence, Malaysia. Net asset per share was 6.27 cents.  Yet, its market value has surged from about $500,000 at the start of the year to an eye-watering $6 billion recently, making it bigger than Temasek-linked SIA Engineering and property giant Keppel Land.At current prices, the stock is trading at a staggering 446 times its historical price-earnings multiple.
So, it was not surprising that many questions have been raised. On Tuesday, the Singapore Exchange finally issued a detailed query to the company on its latest trading activity. Meanwhile, investor lobby group Securities Investors Association Singapore (SIAS) also weighed in and demanded a ” spee-dy investigation” into the unusual share price increase.
” Shareholders need to know the basis and whether the 8-fold price increase is supported by fundamentals of the company,” its president David Gerald stated.
SGX noted that since December 2012, Blumont made announcements on acquisitions and investments in nine companies, of which small investments of under A$/US$10 million were made in six companies. Of the remaining investments, the highest involved a purchase price of up to S$48 million. There was also another investment in Brisbane-based copper explorer Discovery Metals, for A$8.76 million in equity and US$100 million of convertible bonds.  ” These announcements may not sufficiently explain the steep increase in the price of Blumont shares,” the regulator noted.
When announcing its recent 1-for-2 rights issue, Blumont said it was to raise about $43 million for business expansion, including through acquisitions, investments, joint ventures and other collaborations. The 861 million new shares were issued at five cents each – a huge discount of about 96 per cent to the volume-weighted average price of $1.327 per Blumont share on July 26.
” The price of the rights share, which started trading on 26 September 2013, rose from $2.10 to $2.57, surpassing the share price which increased to $2.45,” said SGX.
It is good to see SGX shifting away from its typical stock query and adopting a tougher stance.
Blumont has explained that it was in compliance with listing rules and that it was constantly in talks with various parties on growth opportunities. In a further response yesterday, it said among other things that its stock could have attracted international interest and that this could have ” contributed to the tremendous interest in its securities across borders” .
But the gravity-defying rise of the stock, with volume to boot, appears to defy fundamentals. A question uppermost in the minds of investors is whether the sharp rise of the stock is just a matter of market speculation or whether there is more than meets the eye.

MONDAY, SEPTEMBER 9, 2013

Blumont’s meteoric rise raises concerns

The Sunday Times, 07 Sept 2013
By Goh Eng Yeow 
——————————————————————-
Mining counter’s huge gains don’t square with the firm’s Q2 results
——————————————————————-
THE jitters among the blue chips have not soured traders’ appetite for some of the sexy mining counters now in play.
One of the most appealing has been Blumont Group, which gained an astounding 38.7 per cent in the same four weeks that saw the benchmark Straits Times Index tumble 5.7 per cent.
Even the discomfort flagged by some brokerages such as UOB Kay Hian, which requires clients to have upfront payments if they want to buy Blumont above a certain cash limit, has failed to quell the exuberance.
The counter simply shrugged off the worries and carried on with its rocket-like ascent.
It also outperformed the rest of the mining plays, which chalked an average gain of 6 per cent last month, according to the Singapore Exchange’s My Gateway website.
It left some traders with burning questions over the sustainability of the share’s gains.
Financial consultant Mano Sabnani said: “Blumont’s rise is amazing and defies logic. It has jumped from two cents in June 2011 to about $2 now.”

It ended two cents down to $1.99 yesterday on a volume of 12.05 million shares, valuing the company at $3.4 billion.
That makes Blumont more valuable than well-established firms such as container shipper Neptune Orient Lines, which is worth $2.87 billion, or transport operator SMRT, valued at $1.96 billion.
Mr Sabnani’s concerns are understandable. In its second-quarter results, Blumont reported revenue of $714,000 and a hefty bottom line loss of $24.1 million. They are not exactly the type of financials in keeping with a company worth $3.4 billion.
It recently proposed to raise $43.05 million in a one-for-two rights issue by issuing 861 million new shares at five cents apiece.
My Gateway also has this note of caution on mining plays: “Investors should be aware that MOG (mineral, oil and gas) companies may undergo long periods of time without making economic realisation, and may return to the market for several rounds of fund-raising for further project development.”
One key sector risk is that a company may not be able to progress to the next stage of development, or to a stage where it is able to generate revenues, it added.
For now, however, investors may be more enamoured with the string of investments Blumont has made.
The company, which is seeking approval to change its name to Blumont Phoenix Corp to reflect the change of its business to mineral and energy resources, summed up the various ventures it had taken up since late last year in a recent statement to the SGX. It included investments in an iron ore company in Indonesia, stakes in coal mining companies and in firms with exposure to gold, uranium and base metal mining.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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