There has been a spate of delisting rumors among SGX listed companies recently.
This is not a first. In fact, there has been more delistings than listings on the Singapore Exchange (SGX) which results in a vicious cycle that cause the exchange’s trading volumes to fall further. Unfortunately, this trend will likely continue.
In Singapore, a 90% controlling stake is required to be able to compulsorily acquire all remaining shares and delist a company. The alternative approach to acquiring all shares is a scheme of arrangement which requires 75% of minority shareholders voting for the scheme. In a scheme of arrangement, the controlling shareholder is required to abstain from voting.
Let’s look at three companies that are rumored to be delisting recently. We’ll explore how likely they would delist, and what you can do as an investor.
1) Great Eastern Holding Limited (SGX: G07)
GE’s major shareholder is OCBC. On Monday (19 Jun 2023), OCBC announced that it bought 2.3 million shares in GE at S$16.99 each or S$39.9 million in total, bringing its stake in the insurer to 88.4% from 87.9%.
OCBC did not disclose the time of the transaction. However, it disclosed its purchase price of $16.99. This seems to be an off market transaction. GE’s lack of trading volume also further points to this fact.
OCBC had previously tried to delist GE twice in 2004 and 2006, citing that this would encourage a stronger alliance between OCBC and GE. Delisting GE could also facilitate the development of greater synergies in product development, marketing and distribution.
Since the two failed attempts, OCBC has laid low till now. Currently, OCBC owns 88.4% of GE, just 1.6% shy of the 90% mark. Hence, it is no longer a matter of whether the likelihood of delisting is high or not, but rather a case of whether the remaining shareholders would tender their shares at a suitable price.
OCBC just needs to offer a palatable price to a few large minority shareholders in order to hit the 90% mark.
Hence, the market reacted positively and share prices rose 6% in a week, as hopes resurface on a potential offer.
For investors looking to acquire GE and hold it with hopes of a delisting, it is worth noting that in the most recent financial year, dividend of $0.65 was distributed, representing a yield of approximately 3.6%.
2) Ho Bee Land Ltd (SGX: H13)
Ho Bee’s potential delisting has gone through the rumor mills numerous times. And each time, no actual offer was made.
Ho Bee is a privatisation candidate because major shareholder Chua Thian Poh owns 75.57% of the stock. He could take the company private if the stock continues to trade at depressed levels. Chua Thian Poh has also increased his stake gradually over the years, giving hope to minority shareholders that he may have plans to eventually delist the company.
It makes sense to delist the company because of its steady, recurring income stream from its portfolio of investment properties in Singapore and London, coupled with management’s proven track record in execution. While its Sentosa projects are slow-moving, it is being leased out. Overall exposure is also limited as Ho Bee has previously made some provisions to writedown its inventory and landbank.
For Ho Bee, we think the odds of delisting are not as high as the other companies in this article.
There are many property companies trading at depressed valuation and some are being delisted as the majority shareholder could be a group of persons with no clear succession or in its third generation where the families would like to divide the assets.
In Ho Bee’s situation, Chua Thian Poh’s son Nicholas is currently the CEO of the company, having joined Ho Bee in 2002 and have held several senior management positions prior to his current appointment.
For investors looking to acquire Ho Bee and hold it with hopes of a delisting, it is worth noting that in the most recent financial year, dividend of $0.08 was distributed, representing a yield of approximately 3.8%.
3) Amara Holdings Ltd (SGX: A34)
Amara, a Singapore hotel stock, has disclosed that its Executive Directors and certain of their family members are currently engaged in confidential discussions with a third party in relation to a possible transaction. The discussions are ongoing and there is no certainty or assurance that such discussions will progress beyond the current stage. They may not lead to an offer for the shares of Amara.
Although it is not disclosed which family members are currently engaged in the discussions, the Teo family own more than 70% of shares in Amara.
For Amara, as there is currently no offer on the table, it is not wise to speculate on the likelihood of delisting.
Notwithstanding, the share price has increased 50% in the past month, partially due to an undervaluation as a small cap stock.
However, it is worth mentioning that at the very least, the majority shareholders are considering a transaction.
If this third party succeeds in acquiring more than 30% of shares, they would have to make a mandatory general offer. If this third party acquires more than 50%, the offer would have to be unconditional.
For investors looking to acquire Amara and hold it with hopes of a delisting, do note that in the most recent financial year, dividend of $0.005 was distributed, representing a yield of approximately 1%.
4) Cordlife Group Ltd (SGX: P8A)
On 26 June 23, Cordlife has disclosed that there are discussions in relation to a possible transaction between a shareholder and Southern Capital, a private equity firm focused on control buyouts of high growth mid market segment business. The discussions are ongoing and there is no certainty or assurance that discussions will progress beyond the current stage.
It is not disclosed who is currently in the discussion with Southern Capital. As there are two substantial shareholder group, one with 27.92% and the other with 30.23%, both parties would have to agree to sell their stake for a good chance of a successful buyout.
For investors looking to acquire Cordlife and hold it with hopes of a delisting, do note that in the most recent financial year, no dividend was distributed. In the previous financial years, a dividend of 0.9 cent was distributed, representing a yield of approximately 1.9%.
Closing statements
Investors who want to bet on potential delistings should be reminded that rumours are merely unverified news and do not always come to fruition.
Should these rumours come to fruition, delisting plans do not always succeed. Even if they do succeed, the holding period may cause total investments to be meagre.
From a total return perspective, we think that investors can consider selecting potential delisting plays that also provide for a reasonable dividend yield, especially in the current high interest rate environment.
