ValueBuddies.com : Value Investing Forum - Singapore, Hong Kong, U.S.

Already started for many penny counters.

You either thank or curse SGX for implementing this course of action.

(04-03-2015, 08:22 AM)julianbream Wrote: [ -> ]Has anyone read about the recent news that SGX will require listed companies with share prices less than $0.20 to do a 10-into-1 share consolidation, from 2016?

I am concerned about how this will affect Casa and similar companies. Quite certain that will lose money as I don't see the share price going up 10 times to compensate!

Does anyone here have any thoughts/ advice?

Vested.

Very interesting concern. A 10-to-1 consolidation, required the company to "compensate"? May be you are refering the extra cost to do the consolidation

Hi Cityfarmer,

I apologise, as I may not have been clear in what I meant.

To clarify, I am not referring to any kind of expected monetary payment from Casa Holdings to shareholders, nothing of the sort. All I mean is that for example, if Casa's price is $0.15 before the 10-to-1 share consolidation, the share price needs to go up to $1.50 after the consolidation in order for the value of my holdings not to decline. And I do not forsee such a dramatic appreciation in the share price after the would be consolidation, at least not right away.

I am of course, ignoring past and future dividends and possible share price appreciation in the much more distant future.

Hope this clarifies my question.

(04-03-2015, 10:07 AM)julianbream Wrote: [ -> ]Hi Cityfarmer,

I apologise, as I may not have been clear in what I meant.

To clarify, I am not referring to any kind of expected monetary payment from Casa Holdings to shareholders, nothing of the sort. All I mean is that for example, if Casa's price is $0.15 before the 10-to-1 share consolidation, the share price needs to go up to $1.50 after the consolidation in order for the value of my holdings not to decline. And I do not forsee such a dramatic appreciation in the share price after the would be consolidation, at least not right away.

I am of course, ignoring past and future dividends and possible share price appreciation in the much more distant future.

Hope this clarifies my question.

Share price of $1.50, after 10-to-1 consolidation, changes nothing. The PE, PB, and all others fundamentals remain the same. The % of stake of existing shareholders are remain the same.

One possible change, is the attractiveness of the stock to speculators. A $0.15 per share stock, is much more attractive than a $1.50 per share stock, base on volatility, which is normally disregarded by value investors.

(04-03-2015, 10:31 AM)CityFarmer Wrote: [ -> ]

(04-03-2015, 10:07 AM)julianbream Wrote: [ -> ]Hi Cityfarmer,

I apologise, as I may not have been clear in what I meant.

To clarify, I am not referring to any kind of expected monetary payment from Casa Holdings to shareholders, nothing of the sort. All I mean is that for example, if Casa's price is $0.15 before the 10-to-1 share consolidation, the share price needs to go up to $1.50 after the consolidation in order for the value of my holdings not to decline. And I do not forsee such a dramatic appreciation in the share price after the would be consolidation, at least not right away.

I am of course, ignoring past and future dividends and possible share price appreciation in the much more distant future.

Hope this clarifies my question.

Share price of $1.50, after 10-to-1 consolidation, changes nothing. The PE, PB, and all others fundamentals remain the same. The % of stake of existing shareholders are remain the same.

One possible change, is the attractiveness of the stock to speculators. A $0.15 per share stock, is much more attractive than a $1.50 per share stock, base on volatility, which is normally disregarded by value investors.

I just wanted to take a stab at this.

For example, you have 1000 shares of Casa, the value of the holding is 150, assuming share price of 0.15.

When the consolidation happens, say at 10:1, your holdings will be reduced to 100 shares.

The share price will change to $1.5.

Simple as that.

Some potential pitfalls are that

a) in case this is a counter which you have forgotten about, because you bought it at a much higher price, say at 23.5 cents and you got 50,000 units, you might think you have a windfall and place a sell order for 50,000 shares, whereas in reality you have only 5,000 shares now and you will have to cover your sale and maybe be classified as a short seller. Unlikely to happen to Valuebuddies members, but likely to trip up a lay investor.

b) If you have only 900 shares in Stanchart account, after consolidation you have 90 shares, but you cannot trade in odd lots in Stanchart, so will create 'dead' shares, can neither sell or buy as the maths are against it, as trading in odd lots is costly in Stanchart.

Actually, there are a lot more pitfalls, such as lower interest level, lower rating of erstwhile penny stock and higher rating for Blue chips etc, which will drag this way out of the ambit of this discussion but these are two I could think of off the top of my head.

(04-03-2015, 08:22 AM)julianbream Wrote: [ -> ]Has anyone read about the recent news that SGX will require listed companies with share prices less than $0.20 to do a 10-into-1 share consolidation, from 2016?

I am concerned about how this will affect Casa and similar companies. Quite certain that will lose money as I don't see the share price going up 10 times to compensate!

Does anyone here have any thoughts/ advice?

Vested.

Not necessary will be 10-to-1. It could be any number of shares to 1, as long as it will be above 20c after consolidation.

If a company is doing relatively ok, very likely the price will hold after consolidation. However, if a company is having strings of bad news, then even after consolidation, the price will have much more room to drop after consolidation.

If Casa share price after consolidation is "lesser", I will just buy more : ) yum yum, thanking SGX for creating buying opportunities for value buddies.

Thank you everyone for your multi-angled thoughts. I think there is much merit in the strategy to buy more if the price does not adjust proportionally after the consolidation. All considered, I think I will just hold on to my Casa shares as I acquired them relatively cheaply.

Drop of 12% in Casa today, low volume though, somebody gave up and sold 13K shares at 13.5 cents.

Slow shake out happening i guess.

Will be interesting to see if this happens across counters

Yup almost catch the falling durians : )