BT: Big gains propel small caps into the major league (23 Jul 2007)
Big gains propel small caps into the major league
By NANDE KHIN
(SINGAPORE) The bull market has seen the number of small caps here shrink over the past year, as the share prices of the likes of Yongnam shoot up, propelling them into the major league and for some, even the billion-dollar club.
As at end-June this year, there were only 471 small-caps on the Singapore Exchange (SGX), down from 522 six months ago and 542 a year ago, according to BT's tabulations.
Small-caps have been defined as companies with a market capitalisation of $250 million or less.
In relative terms, the difference is even more stark. A year ago, as at end-June 2006, three in four SGX-listed companies was a small cap.
Today, the proportion has decreased to about three in five.
Excluding counting delisted companies, 71 of the companies which had a market capitalisation of $250 million and below a year ago (at end-June 2006) have today joined the ranks of the mid-caps and even the big-caps.
These include those that have boosted their size as a result of reverse takeovers (RTOs).
Out of the 71 companies, 52 more than doubled their market capitalisation while 39 more than tripled their market capitalisation.
For three of them - SC Global, Sino-Environment and Ezyhealth (now known as Wilmar) - their market cap is now more than $1 billion.
The overall optimism in the market has been, of course, a major factor behind the rally of these counters.
The 12-month period ended June 30, 2007 had for example seen the Straits Times Index rise some 45 per cent.
'So for a lot of these plays - which were once small caps - it has been a case of a rising tide lifting all boats,' said Song Seng Wun, head of CIMB-GK research.
This also explains why even though the pool of small-caps have shrunk, the total market capitalisation of small caps have risen.
As at end-June 2006, the total market capitalisation of the 524 small caps was just $33.2 billion. This had grown 28 per cent to $42.5 billion (for 471 small caps) by 30 June this year,
But for those former small caps whose market cap has expanded four-fold, five-fold and so on, other sector-specific and company-specific factors also are at play.
Those in hot sectors such as property (Soilbuild, LC Development), construction (Yongnam, CSC Holdings and Koh Brothers) and marine (ASL Marine, Courage Marine) have all benefited from positive investor interest in their respective sector.
Said an analyst: 'One can certainly look at the construction-related plays as a good example. One year ago, when nobody paid them much notice, they were really penny stocks. Now with the focus firmly on construction and anything to do with construction, many of them like Yongnam have become quite respectable.'
Yongnam's share price has risen astronomically from 2.5 cents to 50.5 cents over the one-year period to mid-June 2007. The company also did two share placements during this period. Its market cap jumped from $18.6 million as at June 30, 2006 to $605.1 million a year later.
Individual growth prospects also explain a big part of why some former small caps have grown spectacularly.
SC Global, whose shares increased 362 per cent over the one-year period to mid-June 2007, attracted strong investor interest after announcing record property deals. Its market cap rose from $180.1 million to $1.3 billion as at end-June 2007.
Investors have also taken a shine to integrated logistics company CWT, drawn by its strong financials, portfolio of warehouses, active acquisitions and joint ventures. Its market cap expanded from $177.1 million to $608.8 million as at end-June 2007.
RTOs are another big factor for the expansion in market capitalisation for former small caps, as CIMB's Mr Song pointed out.
Examples include Ezyhealth (now known as Wilmar), China Entertainment Sports (now known as Chasen) and Twinwood Engineering (now known as Hup Soon Global).
These companies have all been 'promoted' to the mid-caps and big-caps status after their RTO deals.
As former small caps grow bigger and leave the club, they have increasingly attracted institutional investors. CWT, for example, had Morgan Stanley take a 9.2 per cent stake in it recently.
Deutsche Bank and JP Morgan have each taken a stake of more than 5 per cent in AusGroup, whose market cap has grown from $98.4 million at end-June 2007 to $697.3 million. C&G Industrial has also seen a strong institutional buy-in.
What all these could mean is more small and medium-sized companies being encouraged to take the plunge for a listing, said Eugene Wong, managing partner of Sirius Venture Consulting.
'All small companies aspire to be big, When they see their former peers enjoying strong valuation and institutional interest so rapidly they too will be encouraged to go for a listing.'
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
By NANDE KHIN
(SINGAPORE) The bull market has seen the number of small caps here shrink over the past year, as the share prices of the likes of Yongnam shoot up, propelling them into the major league and for some, even the billion-dollar club.
As at end-June this year, there were only 471 small-caps on the Singapore Exchange (SGX), down from 522 six months ago and 542 a year ago, according to BT's tabulations.
Small-caps have been defined as companies with a market capitalisation of $250 million or less.
In relative terms, the difference is even more stark. A year ago, as at end-June 2006, three in four SGX-listed companies was a small cap.
Today, the proportion has decreased to about three in five.
Excluding counting delisted companies, 71 of the companies which had a market capitalisation of $250 million and below a year ago (at end-June 2006) have today joined the ranks of the mid-caps and even the big-caps.
These include those that have boosted their size as a result of reverse takeovers (RTOs).
Out of the 71 companies, 52 more than doubled their market capitalisation while 39 more than tripled their market capitalisation.
For three of them - SC Global, Sino-Environment and Ezyhealth (now known as Wilmar) - their market cap is now more than $1 billion.
The overall optimism in the market has been, of course, a major factor behind the rally of these counters.
The 12-month period ended June 30, 2007 had for example seen the Straits Times Index rise some 45 per cent.
'So for a lot of these plays - which were once small caps - it has been a case of a rising tide lifting all boats,' said Song Seng Wun, head of CIMB-GK research.
This also explains why even though the pool of small-caps have shrunk, the total market capitalisation of small caps have risen.
As at end-June 2006, the total market capitalisation of the 524 small caps was just $33.2 billion. This had grown 28 per cent to $42.5 billion (for 471 small caps) by 30 June this year,
But for those former small caps whose market cap has expanded four-fold, five-fold and so on, other sector-specific and company-specific factors also are at play.
Those in hot sectors such as property (Soilbuild, LC Development), construction (Yongnam, CSC Holdings and Koh Brothers) and marine (ASL Marine, Courage Marine) have all benefited from positive investor interest in their respective sector.
Said an analyst: 'One can certainly look at the construction-related plays as a good example. One year ago, when nobody paid them much notice, they were really penny stocks. Now with the focus firmly on construction and anything to do with construction, many of them like Yongnam have become quite respectable.'
Yongnam's share price has risen astronomically from 2.5 cents to 50.5 cents over the one-year period to mid-June 2007. The company also did two share placements during this period. Its market cap jumped from $18.6 million as at June 30, 2006 to $605.1 million a year later.
Individual growth prospects also explain a big part of why some former small caps have grown spectacularly.
SC Global, whose shares increased 362 per cent over the one-year period to mid-June 2007, attracted strong investor interest after announcing record property deals. Its market cap rose from $180.1 million to $1.3 billion as at end-June 2007.
Investors have also taken a shine to integrated logistics company CWT, drawn by its strong financials, portfolio of warehouses, active acquisitions and joint ventures. Its market cap expanded from $177.1 million to $608.8 million as at end-June 2007.
RTOs are another big factor for the expansion in market capitalisation for former small caps, as CIMB's Mr Song pointed out.
Examples include Ezyhealth (now known as Wilmar), China Entertainment Sports (now known as Chasen) and Twinwood Engineering (now known as Hup Soon Global).
These companies have all been 'promoted' to the mid-caps and big-caps status after their RTO deals.
As former small caps grow bigger and leave the club, they have increasingly attracted institutional investors. CWT, for example, had Morgan Stanley take a 9.2 per cent stake in it recently.
Deutsche Bank and JP Morgan have each taken a stake of more than 5 per cent in AusGroup, whose market cap has grown from $98.4 million at end-June 2007 to $697.3 million. C&G Industrial has also seen a strong institutional buy-in.
What all these could mean is more small and medium-sized companies being encouraged to take the plunge for a listing, said Eugene Wong, managing partner of Sirius Venture Consulting.
'All small companies aspire to be big, When they see their former peers enjoying strong valuation and institutional interest so rapidly they too will be encouraged to go for a listing.'
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
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