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Sevak stuck on SGX watch-list until June as regulator defers status review

IT solutions company Sevak will remain on the Singapore Exchange's (SGX) watch-list until at least June 2019, after the market regulator deferred its review of the company's application to exit the list.

In the meantime, SGX has granted Sevak a three-month extension on the original March 31, 2019 deadline for Sevak to cure its watch-list status, Sevak said in an announcement on Friday before the market opened. This means that Sevak will not be forced to delist while the review is being deferred.

Sevak appears to have already met the conditions to cure its watch-list status. After posting three straight years of pre-tax losses to trigger its entry onto the watch-list, the company is once again profitable with a net profit of S$3.7 million for fiscal 2018. The company's latest market capitalisation is about S$44 million based on data from SGX StockFacts, which is above the S$40 million threshold.

But SGX's regulatory arm has recently raised concerns about the trading activity in Sevak's stock that drove its share price – and market cap – above the watch-list's requirement.

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On Jan 31, Singapore Exchange Regulation (SGX RegCo) urged investors and potential investors to exercise caution when trading Sevak shares. SGX RegCo noted that the share price of Sevak had climbed steadily from S$2.51 on Sept 17, 2018 to S$4.05 on Oct 19, 2018 – a 61 per cent ascent – despite a general decline in the broad market. SGX Regco said that the company's share buyback programme accounted for more than 70 per cent of the stock's traded volume during that time.

After the share buyback programme ended, SGX Regco also observed the stock holding steady around S$3.80 despite volatility in the broader market, with a group of traders that appeared to be connected to one another accounting for more than 70 per cent of the buy volume in Sevak shares during that period.

One day after SGX issued its "trade with caution" notice, Sevak announced that its controlling shareholder, Smart Co Holding, intends to make a partial offer for the shares of the company directly or through its concert parties. This will result in Smart Co Holding and its concert parties holding about 51 per cent of the shares of Sevak.

Sevak added at the time that Smart Co Holding emphasised there is no assurance any transaction will eventually materialise, and no definitive or binding agreements have been reached in relation to the possible transaction.

Sevak was placed on the watch-list on March 4, 2015, and had previously been granted two 12-month extensions to cure its watch-list status.

The stock last traded at S$3.71 on Feb 20.