Implication of being on the SGX watch-list

[ACTIVIST SPEAKS]

A little history on Compact Metal shareholdings:

Ma Zhaoyang (Chairman) and Zhang Zengtao (MD) bought 117.5m shares each, directly and indirectly, from Mr Chng Gim Huat at $0.08 in Oct 2014. They also bought 235m warrants from Mr Chng at 0.0299, of which only 100m were exercised in Nov 2016.

Mr Chng Gim Huat has a balance of 128m shares and his son Chng Beng Hua (CEO) now holds 17m shares.

Douglas Ong Pang Chye of Sustained Land was introduced by Mr Ma Zhaoyang and a placement of 160m shares were placed to him at $0.05 on 29 Dec 2014. He now controls 197m shares

The latest available shareholdings :
Douglas Ong 197.0m 16.90%
Ma Zhao Yang 117.5m 11.45%
Zhang Zengtao 217.5m 18.70%
Chng Gim Huat 128.0m 11.00%
Chng Beng Hua 17.0m 1.40%

From their history, I am surprised they did not try harder to maintain the listing status.

[ACTIVIST SPEAKS]

Section 216 of the Companies Act provides for the protection of the minority shareholder’s right to be treated fairly against majority abuse. Where the alleged oppressive act is a corporate wrong to the company on top of being a personal wrong to a minority shareholder, an action under Section 216A of the Companies Act is more appropriate. Examples of such oppressive acts include:
1. Mismanagement
2. Misappropriation of company funds
3. Diversion of company assets

Depending on the overall circumstances, the court has the discretion to order any remedy which it deems fit to bring an end to the matter rightly complained of and is not constrained by what the applicant is asking for. These remedies are provided for under Section 216(2) of the Companies Act:

1. Injunctive and directive relief
2. Regulation of corporate affairs
3. Damages
4. Buy-out
5. Winding up

However, till now there appears to be no such oppressive acts.

It is unfortunate that SGX did not approve Compact Metal’s application to extend the time to meet the requirements under 1314 of the Listing Manual as the company was profitable in 2016. However, to remove itself from the watchlist, the company must also achieve a healthy cash flow from its operating activities. Compact Metal’s operating activities recorded negative cash flow of $6.7m in 2016.

Listing Rule 1309 requires the controlling shareholders to make an exit offer to the shareholders. Trading will cease on 31 Mar 17. Hopefully, an exit offer is made before delisting date so that minority shareholders are able to get improved direction on how to proceed. Failing which, one will be forced to either accept the exit offer or remain as a shareholder in an unlisted public company.

[chew]

Listing Rule 1309 requires the controlling shareholders to make an exit offer to the shareholders.  Trading will cease on 31 Mar 17.  Hopefully, an exit offer is made before delisting date so that minority shareholders are able to get improved direction on how to proceed.  Failing which, one will be forced to either accept the exit offer or remain as a shareholder in an unlisted public company.

How about a competitive external offer?

[ghchua]

If you read the rules carefully, it is Listing Rule 1306 which is more crucial here:
http://rulebook.sgx.com/en/display/displ...34&print=1
1306

If the Exchange exercises its power to remove an issuer from the Official List, the issuer or its controlling shareholder(s) must comply with the requirements of Rule 1309. For purposes of Rule 1309, a reasonable exit offer may include a voluntary liquidation of the issuer's assets and distribution of cash back to shareholders.

So, it means that they can either make a reasonable exit offer or voluntary liquidation. As I've said before, I have encountered companies whereby the majority shareholder said that they do not have money to make an exit offer but offers voluntary liquidation. However, since liquidation requires 75% approval of votes in an EGM, it can be voted out. Therefore, minorities can be stuck with an unlisted company if liquidation is not approved. It is not whether you want to accept the exit offer or not. There is no exit offer at all in the first place which is what I have stated in my earlier post.

[ACTIVIST SPEAKS]

Chew - An external offer will be ideal but it is highly unlikely. Chng Gim Huat's son is still the CEO. Douglas Ong was introduced by Mr Ma Zhao Yang. All appears to be on friendly terms and their combined stake is more than 50%. The company just lost its listing status. I do not think anybody, other than the incumbent management, will make an offer.

gh chua - Rule 1306 allows the controlling shareholders to voluntary liquidate and return cash to shareholders as an exit offer. The initiator is the controlling shareholder. I am sure every minority shareholder will vote for it as the NAV is 5.39c. Failing which, they will have to present an exit offer. I do recall a few of those shitty S chip companies where the controlling shareholders claimed they have no money to make any exit offer. And I also believe GEM TV made the exit offer of $0.004 after the share was delisted. So I also agree with your point.

I feel Compact Metal is slightly different as it does have cash in excess of $0.0278 per share and a NAV of $0.0539. The controlling shareholders and "their friends" are well off to make the exit offer. But SGX's Delisting rules give them the upper hand now and their exit offer is likely to be a pittance.

It is time to call SIAS.

[sgmystique]

Firstly, a big thanks to all contributors!

I and a lot of other forumers are surely better informed now about how the process may work out in the next few weeks before Compact Metal gets delisted. The ball is going to be very much in the court of the controlling shareholders (I guess they all know each other quiet well and may most probably act in concert). 

Are they going to provide a fair offer to minority holders and delist or try to make the best of the situation with only their interests in mind. As with a lot of things in life we shall only find out in due course of time. 

As for myself, I will just wait for the management to detail out their plans before taking any action; unless of course the share price goes up by 50-100% in the coming weeks   The one thing I have learnt over the years is never assume anything in the stock markets!!!

[ACTIVIST SPEAKS]

Not sure about the rest of them. But I do hear good things about Douglas Ong of Sustained Land through the people who dealt with him in the past. Maybe things will turn out not as bad as one would expect it to be.

[sgmystique]

Not sure about the rest of them.  But I do hear good things about Douglas Ong of Sustained Land through the people who dealt with him in the past.  Maybe things will turn out not as bad as one would expect it to be.

Thanks ACTIVIST SPEAKS for the info you have provided. Considering that there is some big seller in the market today (Selling through CIMB Securities) and the price has already crashed by over 40% that will give some comfort. Anyway's don't have much choice but to wait and watch

[Hill]

Not sure about the rest of them.  But I do hear good things about Douglas Ong of Sustained Land through the people who dealt with him in the past.  Maybe things will turn out not as bad as one would expect it to be.

Thanks ACTIVIST SPEAKS for the info you have provided. Considering that there is some big seller in the market today (Selling through CIMB Securities) and the price has already crashed by over 40% that will give some comfort. Anyway's don't have much choice but to wait and watch

I think his name was mentioned in BT last week that he bought a bungalow at garlick ave at a good price.

[ACTIVIST SPEAKS]

Unfortunately, Compact Metal in Margin Accounts will be valued at zero at the broking house/banks once they lose their listing status. One has to either top up 100% or force sell one's holdings to satisfy the margin ratio. On a brighter note, the company is "considering lodging an appeal" against the delisting order.