As many mainboard listed shipping/offshore companies are currently struggling with low share prices and a lack of investor confidence, worsened by the prolonged industry downturn, the review by SGX is certainly a welcome move.
SGX has proposed to make the entry criteria for the MTP watch-list more targeted with the addition of a market capitalisation test, a tweak from just focusing on share prices.
After having reviewed the current MTP criteria and taking into account feedback by stakeholders, SGX has this to say: “SGX noted from the review that among companies with a six-month volume-weighted average price (VWAP) of shares of less than SGD0.20, those with market capitalisation of SGD40m or more showed better liquidity characteristics and lower volatility compared with companies with market capitalisation of less than SGD40m.
“This thus suggests that the market capitalisation test as an MTP entry criterion will complement the existing requirement to more precisely achieve the goal of reducing excessive speculation and potential manipulation.”
The proposed MTP watch-list criteria is now two-pronged: the six-month VWAP of the company shares is below SGD0.20; and the six-month average daily market capitalisation is below SGD40m.
A good many shipping and offshore marine companies would have faced delisting if the market capitalisation factor is not added. As at 25 August, at least 15 shipping/offshore companies saw their share prices ended at near or below SGD0.20, including ASL Marine, EMAS Offshore, Ezra Holdings, Marco Polo Marine, Nam Cheong, Pacific Radiance, Samudera Shipping, Swissco Holdings, as well as the two shipping trusts FSL Trust and Rickmers Maritime.
Even Cosco Corp (Singapore), once considered a bluechip stock at its height of SGD7.80 per share in October 2007 pre-global financial crisis, is trading at only SGD0.265 per share. Ezion Holdings, also once a widely traded stock when oil prices were high and held in positive regards by many analysts, has seen its shares traded at around SGD0.245 per share, dropping from SGD1.86 per share two years ago on 22 August 2014.
But even as share price level is not the only factor for consideration by SGX, not all of the Singapore-listed shipping/offshore firms have big enough market capitalisation of over SGD40m to keep them off the watch-list. A check shows that Beng Kuang Marine, BH Global, EMAS Offshore, Marco Polo Marine and Swissco have market capitalisation of below SGD40m, potentially putting them on SGX’s radar.
Much of the hit on share prices came when oil prices started to fall sharply from the second half of 2014, crashing to under $34 per barrel towards end-February 2016 from a peak of $115 per barrel in June 2014.
The impact on offshore marine companies was especially severe and reflected as well by the plunge in their share prices. Offshore and subsea services provider Ezra, for instance, saw its share price hovered at around SGD1 in the first half of 2014 before steadily decreasing to the current weakness. OSV operator Pacific Radiance shares were traded at SGD1.45 about a year ago on 29 August 2014 before they plummeted to less then SGD0.20 since this month. OSV builder Nam Cheong also had a good bull run of its share price from SGD0.14 at the start of 2012 up to SGD0.48 on 22 August 2014 before the decline started.
To make matters worse, when SGX introduced the MTP watch-list criteria in March 2015, the offshore market was in a downward spiral in line with softening oil prices. In response, companies like Otto Marine and Swiber Holdings had implemented share consolidation to meet the listing requirement. Although to little avail as Otto Marine will be taken private while Swiber has gone under judicial management.
Apart from adding a minimum market capitalisation criterion, SGX has also proposed to review companies every half-year instead of every quarter for placement on the MTO and financial entry criteria watch-list. This will then align the review period with the six-month look-back interval used to calculate VWAP.
SGX pointed out it will not place new entrants to the MTP watch-list until it has considered all feedback and finalised any change. The proposal is now open to public consultation until 23 September 2016. If the proposal is accepted, SGX expects implementation to take place by June 2017.
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