Review deferred, Sevak stays on watchlist

IT solutions company Sevak will stay on the Singapore Exchange's (SGX) watchlist until at least June, after the regulator deferred the firm's application to have its status reviewed.

SGX also granted the firm a three-month extension on the original March 31 deadline for it to remedy the issues that caused it to be placed on the list in March 2015.

This means Sevak will not be forced to delist while the review is deferred.

Sevak appears to have met the conditions to get off the watchlist, which it entered after posting three straight years of pre-tax losses.

The company is once again profitable with earnings of $3.7 million for the 2018 financial year.

Its latest market capitalisation is about $44 million, above the $40 million threshold.

But the SGX's regulatory arm recently raised concerns about trading activity in Sevak's stock that drove its share price - and market cap - above the watchlist's requirements.

 
 

Singapore Exchange Regulation (SGX RegCo) had urged investors and potential investors on Jan 31 to exercise caution when trading Sevak shares.

SGX RegCo noted that the shares had climbed steadily from $2.51 on Sept 17 last year to $4.05 on Oct 19 - a 61 per cent rise despite a general decline in the broader market.

It also said the company's share buyback programme accounted for more than 70 per cent of the stock's traded volume during that time.

After the buyback ended, SGX RegCo observed that the stock held steady at around $3.80 despite volatility in the broader market.

A group of traders who appeared to be connected to one another accounted for more than 70 per cent of the buy volume in Sevak shares during that period.

One day after the SGX issued its "trade with caution" notice, Sevak announced that its controlling shareholder, Smart Co Holding, intended to make a partial offer for the shares of the company directly or through its concert parties.

This would result in Smart Co Holding and these parties holding about 51 per cent of Sevak.

According to Sevak at the time, Smart Co Holding said there was no assurance that any transaction would materialise and that no definitive or binding agreement had been reached in relation to the possible deal.

Sevak was placed on the watchlist on March 4, 2015. It had previously been granted two 12-month extensions to remedy the watchlist issues.

The stock last traded at $3.71 on Feb 20.

A version of this article appeared in the print edition of The Straits Times on February 23, 2019, with the headline 'Review deferred, Sevak stays on watchlist'. Print Edition | Subscribe