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[SINGAPORE] Roland Thng is seeking to shake up Singapore's staid corporate landscape, setting up a new hedge fund focused exclusively on influencing the way locally listed companies are run.
The 33-year-old has established EVA Capital SP with US$5 million, and initially plans to take stakes in small-and medium- sized construction and engineering companies in order to pressure them to improve performance.
"It's a new approach and the market will need some time to get used to it," Thng, who is chief executive officer of Singapore-based fund-management firm Dektos Investment Corp, which runs EVA Capital, said in an interview. "Activist investing is a bit offensive in the Singapore and Asian context." Many Singapore companies have a controlling shareholder, which makes it easier to resist demands from activist investors, said Hugh Young, the Asia managing director at Aberdeen Asset Management Plc in Singapore.
"It also isn't the cultural norm," Young said. "It's all more consensual in Asia, less confrontational. Things have been done a lot more quietly, behind closed doors."
Thng said he plans to target Singapore's smaller construction and engineering companies, which often have a lot of cash or receivables due to the recent building boom.
Dektos may buy stakes in some of them and push management to use the cash for special dividends or share buybacks, which would likely boost the companies' shares. It may also push firms to convert their debt to cheaper convertible bonds.
The fund has already bought a stake of about 2 per cent in engineering firm Hock Lian Seng Holdings Ltd, he said. The company has a market capitalisation of S$181 million, a dividend yield of 5.1 per cent and trades at 9.6 times its earnings, according to data compiled by Bloomberg.
Dektos expects the company to continue paying out attractive dividends and will take an activist approach if that doesn't happen, Thng said.
Of the about 60 companies in the construction and materials industry listed in Singapore, 42 have a market capitalization of US$150 million or less, according to data compiled by Bloomberg.
High-profile activist investors have had a mixed record in their efforts to put pressure on Singapore companies.
Last year, Paul Singer bought a stake in Wing Hang Bank Ltd. in what was said to be an attempt to push Oversea-Chinese Banking Corp. to raise its takeover bid for the Hong Kong lender. Singer has a fearsome reputation as an activist investor after successfully suing Argentina in the US courts for repayment after the country's US$95 billion default. In Singapore, OCBC didn't respond to the activist, who eventually sold his stake in Wing Hang without getting a higher bid.
Short seller Muddy Waters LLC put pressure on Singapore- listed commodity trader Olam International Ltd by publicly questioning its finances in a report in 2012, which caused Olam's stock to plummet. Then, Singapore's state-owned investment firm Temasek Holdings Pte bought a controlling stake in Olam last year, triggering a rally in the company's shares.
Thng, who previously worked as a foreign currency trader at OCBC, started Dektos in 2010 with managed accounts focusing on macro and equity strategies.
In 2014, the investment firm appointed Winstedt Chong as chairman. Before joining Dektos, Winstedt was executive chairman of Hartawan Holdings Ltd, which bought Indonesian gold miner Wilton Resources Holdings Ltd for S$300 million in a reverse takeover completed in December 2013.
Thng said Chong's role as an executive director of Dektos was approved by the Monetary Authority of Singapore, more than a decade after he was convicted and fined in a Singapore court for stock-price manipulation. Thng said the verdict has "absolutely no impact in our investments." Chong declined to comment on his conviction when contacted through Dektos. The MAS doesn't comment on its dealings with specific financial institutions or individuals, it said in an e-mail.
If the Singapore campaign goes well, Dektos will tap its existing investors to raise the total amount of the Eva Capital fund to US$30 million and look to invest in more industries, Thng said.
Handled properly, activist pressure on Singapore companies would be healthy for the country's capital markets, said David Gerald, president of the Securities Investors Association of Singapore, an industry group representing shareholders.
"Especially among the smaller listed companies there is some room for improvement in that area," he said.