Beng Kuang (SGX: BEZ) jumped 57% and more on Thursday in Singapore. The cause was the partial sale of a shipyard which aids in eating into the company's debt pile.There's the usual corporatespeak about this: “In the recent years, the group has been prioritising cost minimisation and deleveraging initiatives, while focusing on monetising fixed assets and high-potential business segments within its core business divisions to create new growth catalysts.” A reasonable translation into everyday English would that we've a large debt pile so we're selling assets to reduce it. And OK, that's a perfectly reasonable way to go about business too.
Shipyards aren't a great place to be these days either, the global competition is high, state subsidies elsewhere distort the market. So, not being a shipyard also has its benefits. So, we can take this as being a useful transaction for Beng Kuang shareholders and thus the 40% rise. Which will come as some comfort given the recent performance:
Beng Kuang share price from Singapore Stock Exchange
However, as a grander lesson we can take this as evidence of just how small the Singapore stock market itself is. Sure, there are some relatively large caps like Sembcorp Marine which has had a lot of trade recently.
However, it's worth noting that Beng Kuang has a market capitalisation around the S$7 million mark (depends which time today we try to measure it). OK, we know that small caps can be highly volatile as it only needs a bit of news to make a large difference to small company. But there's also that commentary we can make about the Singapore market. Given the BEZ price some 14 million shares traded isn't all that much of a surprise either.
But the total value of trade is still under S$1 million. And that puts Beng Kuang only just outside the top 50 trades today by value of transactions. That shows us that the Singapore stock market is really pretty small. The oil, gold, futures and options markets there might be one of the SE Asia hubs, but by comparison with the European markets - or Hong Kong - the SGX is really a pretty small market. We don't have to go far down the listings to find ourselves in microcap territory, with all the implications that has about spreads, volatility and trading risk.
