Caution needed on Sino Construction
Traders wonder if once-sleepy counter can keep up its inexplicable upswing
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Traders wonder if once-sleepy counter can keep up its inexplicable upswing
Goh Eng Yeow Senior Correspondent
19 July 2014
The quiet stock market conditions of late have failed to dampen the meteoric rise of Sino Construction, a loss-making S-chip in the construction and civil engineering sector that is transforming itself into a mining play.
Sino Construction used to be a thinly traded counter - it could go for weeks at a time without a single share changing hands on the market.
But yesterday alone, its share price jumped 7.4 per cent to an intra-day high of 29 cents before closing 5.6 per cent higher at 28.5 cents, with 8.25 million shares having changed hands. That took the counter’s gains for this week to 16.3 per cent.
The long-dormant counter took off in dramatic style in mid-December last year.
On Dec 16, it was trading at only 1.1 cents, but over the past seven months, it has shot up to 25 times that level.
As a result, the company’s market capitalisation has gone from just $14.5 million to $375 million.
Moreover, between Dec 16 and Jan 6, the share price skyrocketed from 1.1 cents to 17.3 cents - a surge of 14.7 times in just three weeks.
The counter then reversed course and fell to a low of 10.1 cents on Jan 13, only to resume its climb, trebling in price to reach 30.5 cents on Feb 20.
However, some traders find the giddy rise baffling, considering that the company announced in February that it had suffered three straight years of losses.
For the financial year to Dec 31 last year, it reported a loss of 128.7 million yuan (S$25.8 million). There was apparently nothing to explain the sudden surge in its share price.
Then, on April 3, the share price plummeted 39 per cent, or 8.6 cents, to 13.4 cents - again defying explanation.
The plunge led the Singapore Exchange (SGX) to issue a notice urging traders to trade the stock with caution, after the company replied, on being queried, that it was not aware of any undisclosed information which could explain the fall in its share price.
Coincidentally, April 3 also saw a rout in penny stocks, after news broke of a wide-ranging probe by the Commercial Affairs Department into several listed companies and individuals. The probe was aimed at uncovering suspected trading irregularities that might have triggered the stock price collapse suffered by Asiasons Capital, Blumont Group and LionGold Corp in October last year.
Sino Construction recovered from the April jitters and started to climb sharply again, as the firm announced new business expansion plans.
To its credit, SGX has been at the forefront in pressing Sino Construction for information on board changes and corporate activities throughout the price surges.
Last year, when three independent directors - Mr Yap Wai Ming, Mr Bob Low Siew Sie and Mr Qin Zhong Sheng - resigned from the board on the same day, Dec 19, SGX wanted the company to clarify if any specific concerns had prompted the resignations.
SGX also pressed the company to give more details about its acquisitions of a 19.9 per cent stake in Renaissance Enterprise for $28.6 million in April and a 51 per cent stake in Signet Coking Coal for US$21 million (S$26 million) last month.
Sino Construction said Renaissance owns a firm with a titanium mining concession in Turkey, while Signet has coal-mining interests in South Africa.
For traders, the question lingers: Will Sino Construction’s incredibly lucky streak continue?