The party continues.....
The Straits Times
Sep 1, 2011
companies
Voracious appetite for Sheng Siong shares
The stock has risen 70% since listing on Aug 17, while STI rose just 2%
By Jonathan Kwok
SHARES in supermarket chain Sheng Siong have rocketed since their listing on Aug 17, while the counter's daily trading volumes have gone through the roof.
The stock closed at 56 cents yesterday, a premium of 70 per cent over the initial public offering (IPO) price of 33 cents.
The Straits Times Index has risen just 2 per cent over the same period.
Market watchers point to a few factors behind such investor infatuation.
One is that the home-grown business - which operates 23 stores, mainly in heartland areas - is seen as recession-proof in these turbulent times, as it sells many staple items which consumers need.
Some investors have also been attracted by its pledge to pay up to 90 per cent of its net profits this year and next in dividends.
That would have meant a dividend yield of 8.7 per cent, based on the 33-cent IPO price, if net profits remain unchanged from last year's $42.6 million.
But this yield figure has certainly dropped in the wake of the share price rise.
The huge number of shares changing hands each day has also attracted attention.
The stock has been one of the most heavily traded since its debut, and was at No. 2 yesterday, with 141 million shares being dealt.
'Given the size and free float of Sheng Siong, the volume traded is significantly higher than the recent IPOs that we have seen,' said Sias Research investment analyst Ng Kian Teck.
'There could be institutional investors that are extremely interested in this counter, given its defensive nature and high dividend.'
Sheng Siong's IPO offered 351.5 million shares to retail and institutional investors.
Of the IPO tranche, 11.6 million shares went to Sheng Siong's directors and their family members.
A further 121.88 million were placed with the five largest institutional investors, including JF Asset Management, Prudential Asset Management and FIL Investment Management.
None of these firms owns 5 per cent of Sheng Siong's shares, so their dealings do not have to be disclosed. This makes it hard to discern if the trading activity has been generated by institutional or retail investors.
But it appears that the directors and family members have not been trading in the stock, as no such dealings have been disclosed, as is required under exchange rules.
What is clear is that an average of 116.8 million Sheng Siong shares have been traded daily since it listed on Aug 17 - a significant proportion of the free float.
Remisiers report that, other than long- term investors, the stock has attracted the attention of short-term traders looking for a quick bet, joining other favourites such as Genting Singapore and Golden Agri-Resources.
'The high trading volume can be explained by the significant price movement, which could attract the attention of some retail and intra-day traders, thus creating a self-reinforcing cycle and contributing to the overall volume,' said Mr Ng.
He said that given its high trading volume, there could be investors who are slowly accumulating the shares but have yet to reach the substantial level of 5 per cent, at which they will need to disclose their holdings.
jonkwok@sph.com.sg