Rise of intangibles makes it harder to value assets properly

SINGAPORE investors will soon face greater valuation challenges as Singapore Exchange (SGX) looks to welcome companies with dual class shares - a structure preferred by founder-entrepreneurs who require funding for a rapid ramp-up of the business, while wanting to retain the ability to execute on a long-term strategy.

As it is, valuing a physical or tangible asset is not without challenges. Over the years, several transactions undertaken or attempted by SGX listed entities had been based on doubtful valuations.

In 2017, unhappy unitholders of Sabana Reit lodged a complaint with the Commercial Affairs Department (CAD) over the valuation of a Changi South property. The Reit manager's CEO quit eventually. There were also questionable valuations in deals proposed by companies in the mining, oil and gas sector. ISR Capital's purchase of a Madagascar mining asset was a case in point.