Hot stock: Silverlake falls further on nagging jitters following allegations in report

SHARES of software solutions provider Silverlake Axis resumed trading lower on Wednesday as investors remained spooked by concerns over allegations made by an anonymous report.

After hitting S$0.355 a share, Silverlake climbed to trade around S$0.455 apiece, down 18 Singapore cents, or 28.346 per cent, by 10.39am. More than 36 million shares changed hands.

On Friday last week, Silverlake shares fell by as much as 27 per cent to an intra-day low of S$0.615, prompting a query by Singapore Exchange. The company called an immediate trading halt at 1.20pm. The stock was last traded at S$0.635, down 24 per cent, before the trading halt.

On Tuesday, Silverlake told the regulators that "a report, dated 20 August 2015, was recently disseminated online making various allegations regarding the historical performance and operations of the group".

It said "the authors of this report may have short positions in Silverlake Axis Ltd and stand to realise gains in the event that the price of the stock decreases". The thrust of the report, said Silverlake, "relates to certain related party transactions entered into between the group and private companies controlled by the company's controlling shareholder, Mr Goh Peng Ooi. . ." and "suggests possible impropriety in connection with these transactions".

Silverlake said the allegations were baseless and without merit. But to provide comfort to shareholders, the group will be engaging Deloitte Singapore to undertake an independent review of the allegations concerning related party transactions and the associated profit margins.

UOB Kay Hian has downgraded Silverlake to a hold and pegged its target price at S$0.660.

"We reduced our second stage DCF growth assumptions from 7 per cent to 3 per cent to account for the group's slower growing license and project service segments in the near to medium term. More importantly, we have increased market risk premium from 5 per cent to 6 per cent to factor in firm specific risk as a result of (its) complex corporate structure."