[SINGAPORE] Amid a flurry of delistings from the Singapore Exchange (SGX), one more privatisation offer – especially that for a small Catalist player – should not make much of a difference.
After all, the local bourse looks on pace to hit at least 20 delistings or privatisation offers in the first half of this year.
Already, firms such as offshore oil-and-gas contractor Dyna-Mac and software company Silverlake Axis have delisted this year.
Also in the works are delistings by companies such as hotel group Amara Holdings and technology products wholesaler and distributor Ban Leong.
Still, the move to take medical services provider Singapore Paincare Holdings private should raise some eyebrows.
On May 28, the group received a cash offer – via a scheme arrangement at S$0.16 a share from Advance Bridge Healthcare, a special-purpose vehicle owned by Singapore Paincare’s founder and chief executive, Dr Bernard Lee, and its chief operating officer, Dr Jeffrey Loo.
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This represented a premium of 27 per cent over Singapore Paincare’s last-traded price of S$0.126 on May 26, before the company called for a trading halt. It is also 77.8 per cent above the company’s share price in March, when the company first announced a possible transaction involving its shares.
The offerors said the deal gives shareholders the opportunity to realise their investments at a premium over historical traded prices without incurring brokerage costs.
They also stated that the company has no need to access the equity capital markets, as the company has not carried out fundraising activities on the bourse since its IPO.
All well and good – except Singapore Paincare was listed only five years ago.
In 2020, the company offered some 24.25 million shares to be placed for listing on the Catalist board at S$0.22 apiece to raise net proceeds of S$3.5 million.
The company’s IPO prospectus listed CEO Dr Lee and COO Dr Loo as Singapore Paincare’s largest shareholders, with stakes of 35.31 per cent and 20.13 per cent, respectively, before the placement.
Post-IPO, the duo remained in charge – with stakes of 30.01 per cent and 17.11 per cent, respectively, and spearheaded much of the company’s direction.
Investors should be asking why they are now looking to take the company private – barely five years into listing, and at an offer price that is at a 27 per cent discount to its IPO price.
Lacklustre share performance
To be fair, Singapore Paincare’s stock market performance has been abysmal.
The counter occasionally breached the S$0.23 mark in its five-year run on the local bourse, but its share price has wilted over the past two years.
Notably, its share price decline broadly coincided with the company’s reporting of a full-year net loss of S$0.5 million for FY2023 ended Jun 30, 2023.
While it has since regained its footing and profitability, the counter has never quite recovered to above S$0.20.
This is despite the fact that it has, over the five-year run, announced acquisitions into individual clinics and partnerships with overseas hospitals, such as Chinese community hospital operator Puxiang Healthcare, to expand its reach.
Between its trading debut and Monday (Jun 2), its share price fell 29.1 per cent, Bloomberg data indicated. With dividends reinvested, the stock has returned negative 17.5 per cent over the same period.
The poorer recent performance could make the offer worth it for some investors, amid generally poor liquidity for the Catalist stock.
Gain for the offerors?
With the share price having dipped below S$0.09 a few times, one could argue it is justified for Dr Lee and Dr Loo to take the group back into their hands at this juncture.
The local bourse’s well-documented lack of liquidity has been a core reason for the delisting efforts by several companies and trusts. With interest rates set to come down eventually, bank borrowings may also be more appealing than the local equities market, in case Singapore Paincare needs cash in the future.
But five years may not be considered a long listing life for investors. The S$0.16 apiece offer could be seen as underwhelming, considering the unchanged share capital and original IPO price.
Singapore Paincare’s investors therefore should question whether this offer is worth accepting. The appointment and recommendation of an independent financial adviser for the deal could be crucial as shareholders think about whether they should hold out for a better deal.
