When valuations are low, major shareholders seek to reacquire 100% of their shares in the company that they listed. This is especially true if the company is flushed with cash and do not need to maintain their listing status to raise additional funds.
Some companies prefer to take a long term view and feel that providing half yearly financial reports breeds short-term thinking. In addition, compliance costs arising from the listing status increases as compliance becomes heavier each year, hence they may seek to delist the company to avoid these issues.
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When the major shareholders make a tender offer, it is typically at a premium to existing share prices. Here we share 5 stocks that could potentially be delisted at a premium to existing share prices and give you a windfall!
5 SGX stocks that can give you a windfall if they end up delisting
| Company | Ticker (SGX) | Market Cap (S$’m) | P/E ratio (times) | Sector |
| Jardine C&C | C07 | 11,570 | 9.1 | Conglomerate |
| Great Eastern | G07 | 8,500 | 9.0 | Insurance |
| Ho Bee Land | H13 | 1,740 | 4.4 | Property |
| Frasers Hospitality Trust | ACV | 847 | 14.7 | REIT |
| HC Surgical | 1B1 | 51 | 8.0 | Healthcare |
5. HC Surgical (SGX:1B1)
There has been a few healthcare stocks that has been privatised in recent years such as Singapore Medical Group (SMG), Singapore O&G (SOG). SMG was listed in 2009 while SOG was listed in 2015 and both received privatisation offers this year.
Both groups of investors shared similar reasons for the privatisation offer such as challenges in managing the company in the face of macro headwinds as they believe that the privatisation will provide the owners with greater flexibility to execute long-term investments and enhance value in the long run. Typically, this is alluding to the pressures of quarterly or half yearly reporting and the pressures of making decisions with a short term perspective.
Both companies have also indicated that subdued share price performance has also constrained the company’s ability to execute inorganic growth initiatives and build upon its track record of growth through acquisitions as delisting would enable the companies to pursue more aggressive strategies for growth
HC Surgical is similar to SMG & SOG in many ways in that it is also a medical services group that is majority owned by a group of medical professionals with a variety of specialisation. In addition, despite the strong stable cashflow that the industry generates, the valuation has been lacklustre, perhaps due to the size of the company and the general market sentiments.
4. Frasers Hospitality Trust (SGX:ACV)
Frasers Hospitality Trust (FHT) was the subject of a proposed privatisation offer by its parent company, Frasers Property not too long ago in June 2022 this year. The privatisation attempt was subject to a vote in September 2022 which failed and hence the privatisation was unsuccessful. The share price promptly fell back to levels seen before rumours of the privatisation surfaced.
We covered the proposed privatisation offer previously and noted that the offer price would allow investors to exit their investment at a premium to the broader market. Frasers Property also provided reasons why they wanted to delist FHT in the slide below.
As the share price as fallen back, this could be another chance for investors who believe that Frasers Property will attempt to delist FHT again when they are permitted to do so after the regulatory period.
3. Ho Bee Land (SGX:H13)
There are many property stocks listed on SGX that are illiquid, trading at substantial discount to its net asset value and has one major shareholder with a substantial stake.
Ho Bee Land is one such stock which has been subject to multiple rumors over the years by analyst and media alike. This is because the stock is highly illiquid and its major shareholder, the Founder and Chairman Mr Chua Thian Poh has been gradually adding to his position and currently owns 75.53% of total shares.
The company is also trading at a substantial discount to its net asset value and is financially stable which indicates that it does not seem to need to raise funds from the public.
2. Great Eastern (SGX:G07)
Many would be unaware that Great Eastern has been subject to two privatisation attempts in 2004 and 2006 by its major shareholder, OCBC Bank.
In the 2006 attempt, OCBC Bank managed to raised its stake in Great Eastern to 87.1%. Since then, OCBC Bank has steadily increased its stake to 87.91%, just 2.09% shy of the 90% mandatory delisting limit.
Although it has been more than 15 years since the last privatisation attempt and with OCBC not making any significant moves since, many who bought into Great Eastern since the last privatisation attempt would have given up hopes on a third attempt.
We note that OCBC Bank has not made a significant acquisition since its new CEO Helen Wong took over from Samuel Tsien in April 2021. Although the bank has said that it is hunting for acquisitions in Indonesia to speed up its growth, one would start to wonder if they could also relook at Great Eastern which has grown significantly over the years and as a delisting would likely provide value to OCBC Bank’s shareholders.
1. Jardine C&C (SGX:C07)
Jardine C&C’s (JC&C) parent, Jardine Matheson (JMH) has been streamlining its corporate structure and delisting various entities under the group such as Jardine Strategic and Cycle & Carriage Bintang. With this, one would wonder if JMH would also seek to delist JC&C.
JMH currently owns 75% of JC&C and JC&C’s financial performance for FY21 and 1H22 has been strong. In addition, JC&C has been the of the best performer of the stocks that are part of the Straits Times Index which could be in part because of the share’s perceived undervaluation when compared to the broader market.
JC&C is a structural play on the South East Asian transformation and growth theme. In the last 2 years, the Indonesia and Vietnam economies have outperformed and consequently this was reflected in JC&C’s financial performance.
Jardine C&C’s FY21 and 1H22 performance has been robust, with FY21’s underlying earnings per share and revenue just a couple of percentages off when compared to FY19 and 1H22’s performance recording new highs when compared to FY19 levels. Dividends have also been reinstated substantially as earnings recovered. Hence, it may be financially beneficial for JMH to seek to delist JC&C.
Closing statements
Each of these 5 stocks are from different sectors and they all have the potential to be delisted due to reasons such as a previous privatisation offer, concentrated holdings by major shareholders, illiquidity and most importantly, perceived undervaluation.
However, one must assess these investments on its own merits and have confidence that the company is able to increase its share price or provide sustainable dividends such that the stock can provide a respectable level of total returns.
After all, one should treat a potential delisting as what it is – a windfall by chance.
In my opinion, the writer did not provide good reasons why he thinks these 5 stocks have good potential to be delisted.