Wednesday, September 21, 2016

Should Asia Enterprises Holding Ltd delist from Singapore stock market

Personally I see no reason for Asia Enterprises Holding to continue its listing in the Singapore stock market.

Asia Enterprises is in the business of buying and selling steel. 

It buys steel from the suppliers overseas, meaning from China, and sell to the marine and construction industry in Singapore and neighboring countries.

The company has no debt.  It is a cash rich company that is not likely to need bank loan.

If the cash is evenly distributed to all the shareholders, each shareholder will get about 19.9 cents.

Given that the current share price is still less than 18 cents, it is a no-brainer that the market value is too low.

Asia Enterprises Holding Ltd meets the definition of a net-net stock.  Net-net concept is credited to Benjamin Graham, the teacher of Warren Buffett.

That means you are using 18 cents to buy cash value of 19.9 cents, and you get the real estate (the premise is fully paid), and the business free of charge.

That is why I do not see any reason for Asia Enterprises Holding Ltd to continue its listing in the Singapore stock market.

It is not aggressive in expansion or acquisition of other businesses.

Given the cash holding in the company, there is no need to get bank loan or issue rights to raise funds.

What is the point of paying money to maintain the listing status?

Since the share price is so much lower than the cash holding, it might as well use the money to buy back the shares to the full limit of 10% of the share capital.

Once the limit is exceeded, Asia Enterprises Holding Ltd can issue an offer price to buy back the remaining shares and privatize the company.

It will definitely save cost in the long run.

It does not have to pay to maintain the listing status, and to pay for compliance of listing requirement.

The recent minimum trading price of 20 cents for mainboard listed companies is a really stupid rule.

Since Asia Enterprises Holding Ltd is a mainboard listed company, it will have to push the share price up to 20 cents just because stock exchange says so.

That is a really stupid idea because it adds cost to the listed companies without adding value to the shareholders or the employees of the listed companies.

Even though the stock exchange has put a moratorium on the implementation of minimum trading price, it has not given up on the idea.

If Asia Enterprises Holding Ltd privatizes, it will save the management a lot of time.  They do not have to keep on watching the stock price.  They can focus on the business, and enhancing the value for shareholders, suppliers, their employees and their customers.

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