Business shifts and RTOs cause concern; “It’s better if the authorities can do adequate due diligence beforehand.”

Business shifts and RTOs cause concern

Friday, Oct 11, 2013

Reuters

Reverse takeovers and shifting business strategies involving firms on Singapore’s stock market have come under the spotlight in the wake of the recent collapse in share prices of three companies listed on South-east Asia’s biggest bourse. One of the companies, Blumont Group, lost as much as $6.2 billion in market value in the past week. Prior to that, it had surged as much as 12-fold this year, making it Singapore’s top performer. The company, which listed in mid-2000, has shifted its focus between investment (most recently in mining companies), property development and sterilised-food and medicine packaging.As part of one reverse takeover, Asia Pacific Strategic Investments, a funeral-service provider in Malaysia, is transforming itself into a mining company with assets in Armenia.

A new investor is buying a 30 per cent stake in the restructured firm for $200 million, implying a total value of $667 million. Previously, the company had a market value of about $10 million.

“We have been making losses for the last three to four years. So the company has been looking for a new business or new life,” said chief financial officer Lee Keng Mun. “We believe this gold mine is a profitable business project.”

The changes in business operations and the use of reverse takeovers – where a private firm buys a public company usually to bypass an often-lengthy listing process – and their impact on the broader market risk undermining the credibility of one of Asia’s biggest financial and regulation centres.

“It’s one thing to change businesses like that if you’re a closed-end investment fund, but if it’s a listed company and it keeps chopping and changing, then that raises all sorts of governance concerns, because, as a minority shareholder, you don’t then know what you’re a shareholder of,” said Mr Jamie Allen, secretary- general of the Asian Corporate Governance Association.

The metamorphosis of a handful of small Singapore companies has made them among the most actively traded on the Singapore Exchange (SGX).

As of last week, many of the top-10 performers this year, with gains of 200-900 per cent, had started new businesses or said they were exploring such forays.

The SGX queried most of these companies on the price surge.

“Sometimes, these things (new ventures) can go either way for the smaller investors,” said Mr Jimmy Ho, president of the Society of Remisiers (Singapore).”It’s better if the authorities can do adequate due diligence beforehand.”

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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