We all know about the numerous S-Chips scandals that have occurred here.
I discovered that one fairly good method of spotting dubious companies on SGX is to watch out for the queries that SGX raises to the company.
Once in a while, SGX will raise such queries when they find something in the company’s reporting that needs further clarification.
Sometimes, it can be a question like:
We note that as at xxxx date, other current assets has decreased 40% to $5m. Please provide details on the underlying items and reasons for the fluctuations.
Other times, it might be questions on the profit margin or change in receivables.
Often, SGX will not pursue the matter further after the company gives a reply.
While being questioned by SGX does not mean that a company is a dud, it does give you a good opportunity to see whether the company’s management is able to give sensible replies. Usually, the management of the company is able to answer the questions satisfactory.
Once in a while, I have seen the most ridiculous reply which does nothing more than paraphrase the original question. When these kind of answers come out, it might be worthwhile to re-evaluate the company.
If SGX seems to be having questions to every single quarterly reporting by the company, then you should even be more vigilant.
I think there are some hardworking people in SGX who are doing their job. But without any evidence of wrong-doing, this is the best they can do to alert investors.
On the other hand, I think the queries raised by SGX for clarifications regarding trading activity are the “go through the motion” type. Those can be ignored as I will be able to tell you the reply of the company even before they issue it.
And if you are not monitoring the announcements released by the companies you invest in on a daily or weekly basis, then you should really start doing so.
SGX Query 1:
Are you aware of any information not previously announced concerning you (the issuer), your subsidiaries or associated companies which, if known, might explain the trading?
Company’s response to SGX Query 1:
The Board is not aware of any information not previously announced concerning the Company, its subsidiaries or associated companies which, if known, might explain the trading.
SGX Query 2:
Are you aware of any other possible explanation for the trading?
Company’s response to SGX Query 2:
The Board is not aware of any other possible explanation for the trading.
SGX Query 3:
Can you confirm your compliance with the listing rules and, in particular, listing rule 703?
Company’s response to SGX Query 3:
The Company confirms its compliance with the listing rules and, in particular, listing rule 703.
I like this statement – “Once in a while, I have seen the most ridiculous reply which does nothing more than paraphrase the original question.”
Apparently, I have this colleague here who does exactly that, many a times. So its not just common to dubious companies, but to individuals as well.
Red flag?? 😉
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