TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
Comments
Ven Sreenivasan
18 November 2013
To say that that the penny stock segment of the Singapore market has pulled back would be an understatement - crash landed and still smouldering would be a more apt description.
A liquidity-fuelled speculative (many would suspect, manipulated) party came to an abrupt end when the Singapore Exchange (SGX) finally intervened with unprecedented trading curbs on several penny stocks. This came amid a sudden downward price spiral. In the following weeks, broking houses tightened trading rules on these sub-dollar stocks, including cash upfront for purchases. The regulators are still investigating possible trading irregularities.
Not surprisingly, the net impact has been to subdue sentiment in this erstwhile vibrant segment of the bourse. Much finger pointing and debate about regulatory shortcomings has also ensued over the past few weeks.
But more ominously, there are now questions being raised about the viability of the entire penny stock segment.
In a statement which sent shudders through the market last week, SGX chief executive Magnus Bocker questioned whether the bourse should allow stocks that are denominated in a few cents: “I don’t think so. Some markets in the world have rules on how low the price of a stock can be.”
Of course, some markets do frown upon penny stocks. But there are two questions to consider.
First, can the Singapore bourse afford to wipe out the penny stock segment?
Secondly, is it fair to assume that all penny stocks are duds? Or putting it another way, are all stocks priced over $1 really worth their value?
To answer the first question, one only has to look at the amount of liquidity generated by these sub-dollar counters. By most accounts, almost two-thirds of the traded volume and almost half the daily traded value can come from these so-called penny counters. And the fact that this segment is so active and vibrant says something about the nature of the Singapore bourse and the investment preference of the local investor.
Singapore is largely a retail market. It has always been so and looks likely to remain so (unless the SGX decides otherwise).
Here’s why.
Most market players here would rather plonk down $30,000 on 600,000 units of a five-cent stock with an upside of 20 per cent, than cough up that amount for one lot of a $30 per share blue chip with an upside of 2 per cent. Also, the relatively more liquid penny stock is more attractive for trading-oriented market participants.
This is simply an objective truth, and one which can only be dismissed to the detriment of broader market vibrancy.
To answer the second question, one only needs to pick out a handful of penny stock counters run by savvy management teams, boasting sound fundamentals and showing good growth potential.
Shoebox apartment specialist Oxley Holdings just unveiled $251 million in first-quarter earnings and declared a dividend payout of some $88 million. And Oxley - whose global footprint is growing - has been a perennial penny stock.
Let’s take SingHaiyi, whose stock trades below three cents. The Catalyst company recently bought a huge mall in Ohio, US, at a heavily discounted price in a distress sale and has recognised a rare “gain on bargain purchase” of $12.8 million. In its first set of results since its restructuring, which saw an injection of $226 million in fresh funds, it showed a half-year profit of $8.4 million and a net cash position of $160.4 million. The stock has now been included in the listing of the MSCI Singapore Small Cap Index.
Or take EMS Energy. This offshore and marine (O&M) sector player already boasts more than US$35 million in rig orders and another US$104 million in the pipeline. Not bad for a stock of about six cents!
There are many more companies like O&M play Vallianz, RTO target AP Strategic, turnaround story A-Sonic, water play Hankore, fast-growing crane specialist Sin Heng, and others with real stories and good potential for growth.
The task facing the SGX is to ensure market integrity via diligent governance. Prompt policing can prevent runaway “casino-style” punting and stock manipulations.
But when it comes to valuations and pricing, it is best to let the market decide. No doubt there are some duds out there. But let’s not throw out the baby with the bathwater.