THE Singapore Exchange (SGX) on Sunday night said that it will not be acceding to watch-listed construction firm Swee Hong's delisting appeal as well as its request for an extension of six months for the company to submit its resumption proposal.
As a result, Swee Hong will have to delist by Sept 23, 2020.
The exchange said that it took into account the fact that Swee Hong's scheme of arrangement approved on Sept 2, 2020 will result in the company no longer being in a net liability position upon completion of the scheme. Even with the approval for the scheme, it does not enable the company to meet any of the extension criteria requirements.
In addition, SGX noted that while the company had submitted that investor CIIC Group was able to procure the entry into three memorandums of understanding (MOUs) with large Chinese state-owned enterprises and a public listed firm to participate and collaborate on construction projects in Singapore, within the region and in China, the company has not entered into further definitive agreements nor been awarded actual projects.
SGX said that it is highly speculative, and there is no certainty that the company will be able to secure any actual projects.
As the company currently operates only in Singapore, there is no evidence that securing such projects will enable it to achieve profitability and have a market capitalisation of at least S$40 million to meet the requirements for its removal from the watch list, said the exchange.
SGX also pointed out that there were discrepancies between unaudited and audited accounts, with the re-stated revenue for FY2019 reduced by S$36 million to a negative S$11.2 million from a previously reported revenue of S$25.14 million due to an allowance for impairment loss of S$32.3 million against the revenue.
There was also a significant reduction in gross revenue from S$25.1 million in FY2019 to S$4.7 million in FY2020. The company generated negative cash flows from its operating activities of S$5.4 million in FY2019 and S$4.1 million in FY 2020. Swee Hong also reported an increase in its loss before tax for FY2019 after the re-statement, which widened further to a loss of S$57.9 million.
SGX also said that Swee Hong had submitted that if it fails to maintain its listing status, there can be no assurance that the CIIC Group would continue to support the company financially and operationally. There was also no information provided which suggests that even if a further extension of six months was granted as requested, the company will be profitable and have a market capitalisation of at least S$40 million and will be able to exit the watch list, said SGX.
The board said that the company is not able to make any exit offer to its shareholders, given its current financial position status. It has also written to the company's controlling shareholder KH Foges and investor CIIC Group, which would be an incoming controlling shareholder of the company, assuming the completion of the scheme of arrangement approved on Sept 2, 2020, to ask for an exit offer proposal. Both parties have not done so to date.
Trading in Swee Hong shares has been suspended since May 2019.